For the average "retail" trader, there isn't a benefit, as ICE caters to the commercials. If I were in your shoes I would trade IPE Brent as it's the most liquid, screen traded, energy product.
How many of you actually trade these products? And I mean where the potential for your losses makes you stay awake? There seems to be a lot of big talkers who paper-trade here and have become zillionaires, but not many who actually sweat the ticks every day.
Just because someone trades for an energy shop doesn't mean they're any less concerned about their P/L than someone trading a personal account. I've been on both sides of the aisle and there's as equal amount of "sweating the ticks" on both sides. Furthremore, how can you compare a guy trading futures in his personal account to a guy managing a portfolio of assets, contracts, customer deals, etc? Apples and oranges, no?
You get paid every 2 weeks if you make money or not. Secondly, you see order flow from customers, which you can scalp. Trading a personal account is much harder.
Sure, at the larger energy companies and banks most are on salary + bonus but at most of the energy funds and smaller energy energy shops, your income is generally a percentage of P/L. Yes you see order flow but when a customer calls they're generally not looking for a vanilla product (e.g. NYMEX look-a-like). If they just need a vanilla product, they'll trade it via NYMEX or ICE. When they call they're usually looking for something illiquid, complex, long-dated or something that is very difficult, in not impossible" to hedge. There's also the other side to customer deal flow, taking trades "for the team"... "Harder" is a relative term. What's easy for you may very well be difficult for me, and vice versa.
I'm very interested in your views. Years ago, when arb was a new term, I ran an arb desk for a Tier 1 firm. I;'m not sure if the internet has flattened info flows or I'm just more mature, but IMO, if you take a successful indy now and put him into an arb chair, the firms profits would easily double. I also dont see the bots running trade flows in energy If you want to continue this in PM, please PM me directly. Thanks.
What u trade on ICE is a NYMEX lookalike. It is a cash settled swap based on the last day (LD1) settlement price on the NYMEX nat gas contract for a particular month. The size of each ICE lot however is 1/4 the size of NYMEX. HOWEVER ICE trades monthly blocks. Therefore, while NYMEX is 10,000MMBTU per contract and ICE is 2500MMBTU per contract, the min amount you can trade on ICE is 30 or 31 lots (less in Feb.of course) The tic size is $2.5 per lot and that is how you get $75.00 per tick that was mentioned earlier. On average the spread in normal market conditions is 2 -3 ticks. The average volume traded each day on ICE is between 160,000 and 200,000 or 40-50k NYMEX equiv. One thing I should point out; ICE also has a ICE-Lot market that trades about 5k per day where you could trade one ICE lot at a time. This is not as active because the vast majority of liquidity on ICE comes from larger players in the market such as prop shops, energy companies, hedge funds and banks etc. But there is increasingly interest from smaller traders and the ICE-Lots are picking up steam. Some of that interest is being generated by the same smaller players who are trading IPE on the same screen. I suggest you call ICE and ask them for a free view-only trial and check it out for yourself. If you need more info, email me please.
Rather than PM, let's keep it in the open, it'd be nice to see the discusssions regarding energy markets pick up... I can't comment on the bank arb desk situation (equities I assume) as all of my experience is in energy, primarily OTC. Perhaps you're right but if I were looking for someone to trade energy I would rather hire someone with energy industry knowledge/experience (i.e. infrastructure, assets, transportation/transmission, supply/demand, refinery economics, weather, etc.) vs a successful independent trader, if I had to choose between the two. Having said that, most energy trading shops aren't just punting NYMEX futures, they're trading numerous OTC products and more often than not, they're a "commercial" e.g. producer/generator, marketer, transporter, distributor, or end-user and if not, they're most likely a fund or "boutique" energy shop making markets for said commercials. Take a look at the list of registered Clearport users and you'll notice that there are very few individuals or retail futures shops listed. Regarding your comment about the bots running trade flows, I can't comment as I don't trade QG or QM but, for what it's worth, I do know people using automated systems to trade QG and QM. One thing that can't be emphasized enough...The vast majority of the volume in commodities (both exchange traded and OTC) is commercial and most commercials prefer to do business via the phone. Until this mentality changes, the screens will play second fiddle to the pit. Honestly, the only people I know hoping that the NYMEX goes electronic are the funds that only trade electronic markets and retail traders. Furthermore there's a lot to be said for the info a good broker (floor/OTC voice) can provide as far a intraday market color. Mcurto's color on the bonds is an excellent example. If you or anyone else are looking for some info on the OTC energy markets, check out the following websites: http://www.energyrisk.com http://www.iipower.com http://sparkspread.com http://www.powermarketers.com http://p075.ezboard.com/benergytraders
What do you think the relationship is of real commercial/hedge trading versus speculative/running stops trading? eg, in FX I think only 3 or 4 percent is valid commercial activity.