I have an exceptionaly low opinion of the tech people of IPE's parent company ICE. They do not know how to run an exchange and they are finding that out the hard way with thier nat gas swaps. Yes the volume has grown but the are on the edge of disaster and TT has ceased offering ICE to new clinets b/ the systems are done so poorly. The same will happen with IPE, didnt it crash 3 times yesterday?? Yes it did.
I'd take ICE and their exchange operations, good or bad, over "open-outcry on every continent from NYMEX" Give them credit for not being complete imbiciles like their counterparts in NY.
The Nymex is like a giant ostrich for keeping its self out of the electronic market. Yet I cant give ICE any credit what so ever as they will never be able to take buisiness from the NYMEX because they are not a regulated exchange. ICE is creating an artificail cieling for itself by not getting regulated. The staff at ICE is beyond incompetent when it comes to technology. They have barely survived the last 2.5 years since people arent swinging Cal. power like they did 4-5 years ago. ICE is going to have a hard time moving forward with out graduating it fees and lowering them across the board.
You make a good point about the fees. But that problem can be remedied very quickly. I believe the fees across the futures industry are about 5 to 8 % of the tick value. ICE may be north of that, but in comparison to the OTC voice market, they are the best rate out there. It's robbery what the voice brokers charge. The only ones the futures industry has to thank for the fee holidays is Eurex. And bravo for the Chicago FCM's for playing the CBOT like a fiddle.
I expect all markets to be electronic markets eventually. I also expect commodity prices to become much less stable as the US Government goes broke. The Government will have to abandon it's price stability policies. Just my idle guesses. My crystal ball is busted.
That problem will not be rectified as easy as you think. ICE is standing firm on the fees. The fact is that the IPE has cost them an enormous amount of money they didnt account for and tehy have been subsidizing it with natty swaps. They have outdated matching engines that they have never let TT stress test. ICE is 40 a round turn for natty swaps and they are charging the exact same as the open out cry at the IPE. I dont mean to be curt but that is a lousy arguement regarding the voice brokers. That is ICE's exact response when you complain about fees. The fact is the voice brokers cut deals with any firm that will do enough volume they arent dumb, thieves yes but not dumb. Do you know that over 20% of ICE's volume comes from 4 prop trading firms. ICE openly admist that is the IPE doesnt take off (which I think it will) they will be flat broke in under 12 weeks. I would love it to work and it should inspite of ICE's utter incompetence.
Ok... you make some good points. But they are also in line with NYMEX fees for an equivalent size futures trade. I don't like paying fees anymore than the next guy, but why would ICE jump to the CME, CBOT, Eurex graduated fee structure model if their primary competition for natgas futures earns at a higher rate for the "same" product with worse execution? I think they'll succeed in spite of themselves as well. I mean really... look who they're up against. Anti-electronic, Anti-retail, and investing millions in an open-outcry business model that every major exchange has turned their backs on. Nobody is driving them to be like the premier exchanges as you'd wish.
I agree with what you are saying. Yet if they lowered the fees I think they could realy end it for the NYMEX natty contract. It just boggles my mind that they wouldnt go that one extra step to realy seal the deal for the nymex. Regardless the Nymex move towards "Global Open Outcry" is funny as hell.
sounds like you guys are really plugged in to what happens in the OTC energy markets... but maybe you can enlighten me (who is less familiar)... is the idea that ICE/IPE could hurt NYMEX the most, not in crude, but in natural gas? Is this because ICE already has part of the OTC flow, but OTC gas traders still use NYMEX gas to hedge? And therefore, ICE could nail NYMEX by providing, as it were, an all-in-one natural gas solution - all the gas basis swaps, futures, etc go through ICE and NYMEX floor is therefore completely bypassed? thanks!
ICE/IPE is going to have a very hard time hurting the NYMEX in terms of oil. The NYMEX WTI contract trades 2-3 times the size of the IPE's brent contract on any given day. If and when electronic brent takes off we will see how WTI gets effected. ICE has an extremely good flow in natty swaps. Traders will go where the colume is and right now ICE is doing almost equal volume in the front month nat gas when you break it down to NYMEX equivilents. The swaps trade in line with the floor so there is no need to hedge on against the other, if anything it is an arb not a hedge. You must keep in mind that ICE is a non regulated "proffesionals only" exchange. It is not a regulated futures exchange and it doesnt have the desire to be as that process would take a year plus to jump through all the needed fed. regulations. In my opinion they should strive for that but they have blinders on and just want to cater to the OTC market place at this point and time. This is extremely short sighted/