The energy online marketplace is crowded, confused and on theverge of shaking out and consolidating, according to three whoshould know, two CEOs of successful trading platforms and a Nymexexecutive, who yesterday shared their predictions at the EnergyRiskTech Conference in Houston.
Rusty Braziel, founder and CEO of Altra Energy Technologies;Vincent DiCosimo, CEO of RedMeteor.com; and Neal Wolkoff, executivevice president of Nymex, shared a panel discussion on the futuredevelopment of electronic energy exchanges. While all seemedconfident of the future of their own enterprises, they acknowledgedthat the growing number of players in online energy trading todayhas made for an oversaturated marketplace.
“Clearly, liquidity has been achieved in the onlineenvironment,” said Braziel. “But it’s a confused marketplace. Thebig question is when is there going to be a shakeout, and how manydo we need? What is the future? Will it be the independents or theproprietary platforms that succeed?” Answering his own questions,he said, “frankly, I don’t have a clue.”
Within five years, though, Braziel predicted that the marketwould become more digital than it is today. “We are seeing morecomplex transactions on line and they will become more complex inthe future and a significant amount of them will be digital.”
Braziel said that a more networked market would allowinformation to become more integrated, and there would be moretransactions across different platforms. The “Holy Grail” would beobtained when redundant information is eliminated and the amount ofmistakes made online is reduced.
In a sideways reference to the overwhelming market response toEnronOnline, Braziel said that in his view, “in the next two tothree years, the market will support a number of differentplatforms, but the market will not tolerate a significant singleprovider. What we do see are more transactions, more liquidity.”
However, Braziel does see a smaller pool of online traders,which won’t occur without some “fallout,” though. “There will bemore alliances, more integration in the marketplace.RedMeteor.com’s DiCosimo said that it seemed as if new tradingplatforms were “arriving daily.” At his company, he said, thetrading is not built around the Website, but rather, around thebusiness itself.
“The marketplace doesn’t care in the end how quick it is,”DiCosimo said of online trading. “It doesn’t matter what color theWebsite is. At the end of the day, it’s got to make you moremoney.”
But he also sees the online traders becoming fewer. “I see acollision taking place in the market between the Internet,bandwidth and commodity trading,” said DiCosimo. “There are stillmore opportunities, but it’s not an end all, simple adaptation ofthe marketplace.”
In fact, DiCosimo said that while energy online trading hasgrown, it would never replace the “human event.”
“This conference could have been webcast,” he pointed out, “butthe human event is very important. It is key to success in today’smarketplace.” While the door is opening for “people who neverthought of trading before,” online or not online, DiCosimo alsopredicted there would be fewer online trading players by this timenext year. “I would have said it would take a year, but now I’mthinking it could be a few months before we start seeing morealliances.”
Nymex’s Wolkoff said that he also expects some sort of meltdownto occur within the online trading market, but he also predictedthat it would remain strong, no matter its size. “It’s appropriateto have a healthy respect for the technology. These are usefultools. But it has to be looked at for what they can provide in thereal world, not the virtual world.” Wolkoff said that Nymex isattempting to use the lessons learned from other successful onlinetraders as it prepares to launch its own e-commerce platform.
Wolkoff said that if technology was the entire “solution” toenergy trading, there would be “20 pure success stories. Clearly,we don’t have that many now. And a year from now, maybe we’ll see20 new success stories.” He predicted that “most” of the onlinetrading systems will cease to exist, and if even “two or threeexist a year from now, it will be a bit of a surprise as to whomade it.”
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