Message-ID: <22318688.1075857577383.JavaMail.evans@thyme> Date: Tue, 8 Aug 2000 10:54:00 -0700 (PDT) From: john.arnold@enron.com To: greg.whalley@enron.com Subject: Reuters Story on E-Exchange Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: John Arnold X-To: Greg Whalley X-cc: X-bcc: X-Folder: \John_Arnold_Dec2000\Notes Folders\All documents X-Origin: Arnold-J X-FileName: Jarnold.nsf ---------------------- Forwarded by John Arnold/HOU/ECT on 08/08/2000 05:54 PM --------------------------- "Zerilli, Frank" on 08/08/2000 08:17:19 AM To: "David D'alessandro (E-mail)" , "'jarnold@enron.com'" cc: "Glynn,Kevin" , "Wolkwitz, Rick" , "Kelly, Joseph" Subject: Reuters Story on E-Exchange By Fiona O'Brien LONDON, Aug 8 (Reuters) - The head of the largest yet Internet exchange for energy products said it will combine traditional anonymity with transparency to give traders a better overview of market activity. The InterContinentalExchange (ICE), an Atlanta-based venture initiated by seven major oil companies and banks is due to launch August 24 for trade in precious metals swaps, with energy products trade to go live soon afterwards. While market transparency will increase as dealers used to over-the-counter (OTC) telephone-based market trade on a screen, users of the ICE will remain nameless up until the point of trade, Jeffrey Sprecher, ICE's chief executive officer told Reuters in an interview. "As soon as you hit the deal, the system reveals both counterparties," he said. "The real strength is that you (still) get the ability to manage your own counterparties. "You can list all of the people you want to do business with and put in the credit terms under which you will do business." This information will then be processed by what Sprecher called a "giant matrix" within the system. "(At the moment) people in the over-the-counter market aren't sure they have ever seen the entire market," he said. "(On the ICE), deals you can do will appear in white and deals you can't do will be in grey, but you can see the entire market." Giving players a fuller complement of figures than they are currently aware of in a telephone-dominated market should increase market transparency, as they can keep abreast of the activities of dealers who fall outside their own trading criteria, Sprecher said. The exchange is expected to function in real time around the clock and will be accessible via the public internet or a private network connection. Initial liquidity will be provided by founder members BP Amoco , Deutsche Bank , Goldman Sachs , Morgan Stanley Dean Witter , Royal Dutch/Shell , Societe Generale and TotalfinaElf . Shell runs the industry's largest international oil trading operation and Goldman Sachs' J.Aron commodities arm last year was dominant internationally in unregulated OTC oil derivatives. Late in July the original cast was joined by six gas and power companies, American Electric Power Utilicorp's Aaquila Energy Duke Energy El Paso Energy , Reliant Energy and Southern Company Energy Marketing . Sprecher said continued liquidity would be ensured by the fact that the founding members will pay fees even if they do not trade and will face additional penalties if they fail to live up to their commitment to trade a minimum volume. TRADERS STILL TO DO OWN CLEARING As well as increasing awareness of market moves, Sprecher believes trading over the Internet could boost trading profits. "The economics (of the system) will be driven by the fact that a paperless back office can really save a lot of money," he said. However such savings on trading the ICE appear some way off given that dealers will initially have to continue using their own clearing systems, as they do in current OTC systems. Under the ICE, once a deal has been struck both counterparties will receive an electronic deal ticket which will then go through those players' own risk management systems. But the exchange is eager to look at ways of introducing its own clearing system. "No one really knows how at the moment," Sprecher said. "There might be some hybrid between traditional exchange clearing and what now exists peer to peer." In terms of participation costs, no membership fees will be incurred except those associated with trading. Membership is open to any commercial market participant. Each product will have its own published commission schedule, which Sprecher assessed at "slightly below the best prices someone would pay in the voice broker business". ((London newsroom +44 20 7542 7930) For related news, double click on one of the following codes: [O] [E] [ACD] [U] [ELE] [ELN] [UKI] [EMK] [MD] [CRU] [PROD] [ELG] [NGS] [WWW] [US] [GB] [FR] [DE] [BNK] [DRV] [EUROPE] [WEU] [MEAST] [LEN] [RTRS] [BPA.L\c] [DBKGn.DE\c] [GS.N\c] [MWD.N\c] [SHEL.L\c] [SOGN.PA\c] For related price quotes, double click on one of the following codes: Tuesday, 8 August 2000 13:24:31 RTRS [nL08439249]