Online trade fans cheer ICE US oil contract growth
Thu May 25, 2006 2:09pm ET
NEW YORK (Reuters) - In only three months, total open interest for the U.S. crude oil contract traded electronically on the IntercontinentalExchange (ICE) has risen to about 20 percent of that traded mainly in open-outcry on the New York Mercantile Exchange (NYMEX).
Observers say this is yet another sign that all petroleum trading will eventually be done electronically.
Data gathered from the two exchanges and compiled by Reuters shows that since ICE started offering WTI futures trading in early February, open interest has climbed from less than 30,000 contracts to more than 200,000.
In the same period, the contract's open interest on the NYMEX has increased at a slower pace, from 950,000 to about 1 million.
Proponents of electronic energy trading say the rising open interest on ICE is proof that traders are looking for the price transparency and efficient trade execution it delivers and that with growing use of hedging and derivatives trading, online trading is likely to become more attractive.
They may be bitter rivals, but NYMEX and ICE agree on one thing: interest in energy trading in general is booming.
"It isn't (a land grab) at all. They're not taking a large slice of the pie, it's just an indication that the pie has gotten bigger," said NYMEX spokeswoman Anu Ahluwalia.
"Our volume has steadily risen too. We're the established benchmark, we're not starting from zero," she added.
An Internet start-up based in Atlanta that grew to eventually take over London's International Petroleum Exchange, retire its name and transform it into an electronic exchange, ICE has been at the forefront of the move to trade energy without the use of open-outcry trading pits.
"Most asset classes today trade electronically and energy has just begun that transition. The industry is growing," said Kelly Loeffler, an ICE spokeswoman.
So is the future of energy exchange trading all-electronic?
"Certainly for ICE it is," Loeffler said.
Traders and analysts say that eventually all oil trading will be done on electronic platforms and NYMEX will have to close its open-outcry trading pit.
"Every exchange has gone electronic and I expect the same is going to occur here too," said Mike Fitzpatrick, vice president for energy risk management at Fimat USA. "They'll be dragged kicking and screaming into the future."
When ICE took over the IPE, London traders initially opposed going all electronic and the same is likely to happen with floor traders on the NYMEX.
"Traders fear change," Fitzpatrick said. "I'm looking at it with some trepidation myself, but I realize it's something we have to do."
NYMEX will take a step in that direction next month, when it will list its energy and metals futures contracts on the Chicago Mercantile Exchange's electronic Globex platform.
The 134-year-old NYMEX, which bills itself as the world's largest physical commodities exchange, will for now maintain floor trading in New York, but has already announced plans to close it at its London site, which has seen limited activity, and move to all-electronic trading there. |
