Now lets see a significant other player:
March 21, 2000
Seven Banks, Energy Firms
Will Form Online Market
By PETER A. MCKAY
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- Seven large investment banks and energy concerns agreed to
form their own online metals and energy market Monday, a potential
behemoth in a commodity industry in which traditional U.S. exchanges have
been slow to embrace electronic trading.
Agreeing to establish the IntercontinentalExchange by year end were BP
Amoco, Deutsche Bank, Goldman Sachs Group Inc., Morgan Stanley Dean
Witter & Co., Royal Dutch/Shell Group, Societe Generale Investment
Banking, and Totalfina Elf Group.
The market will at first offer only precious metals and energy products --
including gold and crude oil -- to be traded in cash and private derivatives
transactions. Those commodities already are the world's most actively traded,
accounting for about $1.8 trillion in over-the-counter deals annually.
"What's attractive to us is the ability to
serve customers online and eventually
carry out these trades on the Internet
without a human hand touching them,"
said Neal Shear, head of world-wide
commodities trading at Morgan
Stanley.
Other fledgling online energy markets
have sprung up in recent months, such
as HoustonStreet.com
(www.HoustonStreet.com), operated
by several energy-marketing and
trading firms, and EnronOnline
(www.EnronOnline.com), operated by
Enron Corp., the mammoth
Houston-based gas and electricity
concern.
But the list of partners in the IntercontinentalExchange could nevertheless
prove daunting, given the amount of volume they would automatically bring just
by doing their own business on the new trading platform.
"We were very interested in assembling the liquidity with the other top players
in this market," said Chris Moorhouse, chief executive of BP Oil Trading
International. "We were anxious to try to avoid fragmentation in the market."
He left open the possibility that the parent firms could offer public stock in the
new exchange, which will be based in Atlanta.
That's the home of the Continental Power Exchange, whose president, Jeff
Sprecher, will become chief executive of the new online market. He said the
seven partner firms are buying CPE's assets and technology for an
undisclosed price to use as the backbone of the IntercontinentalExchange.
Mr. Sprecher will have an equity stake in the exchange, and the partners have
agreed to invest an additional $20 million in its development, he said.
An exchange spokesman declined to say how much equity each partner firm
would have in the IntercontinentalExchange, although he said none would have
a majority, controlling interest.
Monday's deal was certainly a coup for CPE, which hadn't traded any
commodity products since 1997. Before then, the company had functioned as
a computerized electricity cash market and delivery mechanism.
"Because of electricity deregulation, we realized that business had become
somewhat obsolete," Mr. Sprecher said. "We decided to refocus on
developing the technology, which we thought would eventually offer us more
opportunities."
The new exchange will just be one of several new ventures, including the
online BrokerTec derivatives mart, that could eventually pit commodity trading
houses against the traditional exchanges where they hold memberships.
Just last week, the New York Mercantile Exchange snubbed a proposal by
Goldman and Morgan Stanley to create their own online market. Exchange
Chairman Daniel Rappaport complained that the market had too little time to
evaluate the plan and would have received too small an ownership stake.
Officials said the products the IntercontinentalExchange plans to offer at first
won't compete directly with Nymex contracts, since the majority of
over-the-counter deals now take place over the telephone, not on exchange
floors.
A Nymex spokeswoman declined to comment on the
IntercontinentalExchange deal. |
