After suffering through the World Trade Center tragedy, electronic energy marketplace TradeSpark LP managed a significant rebound, producing transaction, volume and revenue growth. The trading system, which was formed by eSpeed, Inc., Cantor Fitzgerald and five of the largest U.S. energy producers/distributors, traded more than $40.2 billion (notional value) in energy products in the fourth quarter and more than $150 billion since its inception in October 2000, the company said on Tuesday.

“In the fourth quarter, our business grew significantly, including triple-digit growth in the number of electronic trades, and our business is continuing to grow in 2002,” said Mike Williams, managing director of TradeSpark LP. “Despite the devastating tragedy that our company suffered this year, we posted record numbers in all areas of our business, which is a testament to the resilience of our people, the strength of eSpeed’s technology, the support of our partners and the participation of the overall energy marketplace. We are encouraged by the natural customer migration to neutral, multilateral exchanges.”

Fourth quarter transactions increased 81% compared to fourth quarter 2000. In 2001, transition to an electronic trading environment accelerated. TradeSpark recorded a 295% increase in the number of fourth quarter electronic trades compared to the same quarter a year ago. Currently, 231 companies and more than 3,500 users participate in the TradeSpark marketplace. Non-partner trading activity accounts for nearly 50% of TradeSpark’s overall trading volumes.

Williams said the downfall of Enron and its electronic trading system triggered a mass migration over to platforms that provide multiple trading partners rather than only one. “What we think happened with [EnronOnline’s demise] is that it really expedited what we thought was going to happen anyway,” he said in an interview with NGI. “It expedited the migration of the customers from a bilateral situation whereby they had credit exposure to one company, to a diversification of credit risk.

“In terms of timing…, it could have been a little better for us in terms of having to pick up market share immediately. If Enron had been kind enough to have waited another couple of months for us to get back on our feet again in a solid fashion, it would have been better for us,” he said. “Now in January and in February, we’re seeing…increased growth and are very comfortable that our footprint in the marketplace is increasing.”

Energy Consultant Ben Schlesinger predicted recently that half of Enron’s energy trade will be split by conventional competitors and UBS Warburg Energy, which purchased Enron’s trading business and online trading system. Schlesinger estimated UBS will get only about 20% of Enron’s original market share (including about 8-11 Bcf/d of gas sales), which at its peak was about 15% of the entire market. The other half of Enron’s business will migrate to electronic trading systems, Schlesinger said.

Williams said TradeSpark has 40 new electronic trade agreements waiting to be processed. Institutions are waiting to get on the system every day, he said. And he thinks TradeSpark may be ready to make the big jump into cleared transactions in which a clearing firm, most likely Cantor Fitzgerald, would act as the seller to every buyer and the buyer to every seller. Providing clearing services would enhance the financial integrity of each trade and provide participants with greater financial certainty. It also would give TradeSpark a better competitive footing against rivals IntercontinentalExchange and the New York Mercantile Exchange. Nymex already provides clearing services and ICE is awaiting CFTC approval to do the same.

“We think we are right on the tip of the iceberg. We will extend our product base this year, especially in the physical gas market…and possibly provide cleared products, whether that be futures or other forms of cleared transactions that the marketplace is really looking for as well. We do have that availability through Cantor Fitzgerald and eSpeed. The system is approved [by the Commodity Futures Trading Commission] and we can through a clearing system have an exchange type of a situation. I think the marketplace has to look at it. We could provide it now. It’s a question of when the marketplace gets together and comes up with algorithms for netting agreements that everyone is comfortable with.”

In 2001, TradeSpark added emissions, coal, off-peak power, hourly power and balance-of-the-day instruments. In 2002, the company plans to expand into the Canadian market and looks to continue to add products that are actively traded and supported by market participants. In the next year, TradeSpark plans to expand the personalized trading functionality the system currently offers and to increase market liquidity by implementing rule-based trading systems.

The TradeSpark energy partners are Coral Energy, Dominion, Entergy-Koch LP, TXU Energy Trading and Williams Energy Marketing and Trading. Dynegy Inc. will be a future member in the TradeSpark partnership. For more information, visit www.tradespark.com.

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