Volumes of gas traded are growing on both the QuickTrade and Altra Streamline electronic trading systems, and both already are looking to electricity trading as the next frontier. Matt Frye, vice president at Altra Streamline, said his company plans to add electricity trading this year and will own and manage the product. David Hanson, QuickTrade’s director of marketing, said although his company is looking at it they have not picked a launch date.

On any given day, about 20 of QuickTrade’s points will be active, the most active being Chicago, Columbia Gas (TCo Pool), and Midcontinent. Depending on the day, Chicago or TCo will be the most active. “That’s the most encouraging thing on the system. A year ago, Chicago was by far the biggest point, and there are lots of days now where it’s not our biggest point.” Chicago and TCo average half a Bcf/d each on the typical day. “One of the reasons is there tends to be more monthly deals at those points. The individual day trades have a lot better distribution.” Gulf Coast points – Columbia, Henry Hub and Tennessee – have picked up in the last few months, Hanson said.

In the United States, QuickTrade trades about 2 Bcf/d of gas in 125 to 150 transactions at 136 trading locations. Canadian trading averages about half a Bcf/d. “Both of those numbers are close to three times what they were in January of 1997,” Hanson said. The system has a total of 140 trading points, including six in Canada where really only the Intra-Alberta point is actively traded.

Intra-Alberta is the most active point on Streamline, with over 2.5 Bcf/d traded on the most actively traded days of the year. As for the others points, “it kind of ebbs and flows. Different pools get hot on different days,” said Frye. “I’d probably say about 18 points are what I’d call relatively liquid, and by that I mean they trade every single day. At most of these [18] points, we’re moving in excess of 100,000 MMBtu/d.”

“We closed out the year with numbers across the board way up,” he added. Streamline in Canada (Natural Gas Exchange) volumes went up about 119% in 1997 from 1996 levels, and Streamline in the States was up over 60% from ’96 to ’97. In North America, Streamline trades more than 5 Bcf/d, Frye said, with about 2.2 Bcf/d of that traded in the United States.

Traders using the electronic systems find them useful, at the very least for price discovery. “When price ranges are tight, electronic trading reflects the market about as accurately as anything, but during volatile wide ranges it’s not much help in pinpointing price; just the nature of the beast.” said one trader whose company uses both Streamline and QuickTrade. “We use electronic trading as a tool more than anything else to make sure we’re staying within the bid-ask parameters,” said another trader, who noted only a small amount of his company’s overall business is done using electronic trading.

The market barometer of electronic trading can work both ways, another trader pointed out. “It is much harder to catch someone sleeping when he can look at a magic box on his desk and know where deals have actually been done. [The] flip-side is that it is reassuring to know that you are not the one getting caught out of the market.”

Earlier problems with erroneous postings have generally been solved. For example, someone may want to sell gas at Nymex minus eight cents but mistakenly posts an offer to sell gas at eight cents. “I have heard of that scenario actually happening in the past,” a trader said. “However, since then there have been controls established where any deal done one dollar or more out of the market gets yanked from the system and the electronic trading system notifies the parties and allows them to settle the obvious discrepancy.”

The absence of liquidity is not the problem it once was either. “Gone are the days of an offer at $3.00, a bid at $1.00 and deals getting done on the telephone for $2.00. Liquidity in the market has brought the electronic market into line with the actual market.”

Perhaps by dint of human nature, some traders say they would rather do business voice-to-voice over the telephone. One trader reported some colleagues go as far as trying to find out who has made the anonymous post on the electronic system in order to call the party and do a deal directly without paying the electronic trading commission.

Joe Fisher, Houston

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