IPE aims to start online trading next year

Europe's biggest energy bourse, the International Petroleum Exchange (IPE), aims to conduct all its business eletronically by April or May next year, bringing to an end one of the last bastions of open-outcry trading.

No firm date for the move has been established, but all contracts - including global benchmark Brent crude oil futures -should be traded exclusively over an electronic platform by this time next year, according to the IPE's website (www.ipemarkets.com).

The move has been anticipated for some time but repeatedly delayed as the exchange took longer than expected to select a range of trading systems to operate with software provided by the IPE's owner, Internet-based IntercontinentalExchange (ICE).

Already a leader in Internet-based trading of over-the-counter energy derivatives, the U.S.-based ICE initially hoped to end open outcry on the IPE within a year of its purchase last summer. That timeframe is now a year behind.

The switch will bring to an end more than 20 years of open outcry trading on one of Europe's last remaining big pit environments. It will hit brokerage commisssions in the short term, but some brokers believe the move is necessary.

"It's key to the IPE's long-term survival because if the IPE doesn't go electronic, another exchange would do and take all its business away," said Christopher Bellew of Prudential-Bache International Ltd.

A number of exchanges - including the London-based Liffe - have switched to cheaper, more efficient electronic trading systems in recent years, with boosters highlighting better accessibility and error-reduction with screen trade.

But some users have been less supportive, particularly the independent local traders who provide liquidity, fearing that the coming electronic transition may leave them jobless.

The fact that ICE is owned by a consortium of the big oil companies and investment banks -- as opposed to the previously member-owned IPE -- has also raised some concerns among users.

By year end, the IPE also aims to extend the current 8:00 a.m.-9:45 a.m. electronic trading session until early afternoon for Brent and late morning for gas oil, under the new system that will replace the exchange's current one, the website says.

It hopes to move this morning session onto the ICE platform in November or December, a target that has also slipped several months since it was first announced in March.

Market sources say the half-day session will likely mean the gas oil contract will trade up to 11 a.m. electronically and until its 5:30 p.m. close in the pit, with Brent trading on the screen until 2 p.m. and then until 7:30 p.m. on the floor.

The exchange's small natural gas futures contract, already traded electronically, will be the first to migrate to the new ICE platform, doing so on June 28, the IPE's website says.

The IPE's main rival, the New York Mercantile Exchange, has attempted to woo disgruntled traders by opening a Brent crude futures contract on its own trading floor, which it has no plans on phasing out. But liquidity in the contract has been dismal.

Nymex energy contracts trade nearly 24 hours a day thanks to the electronic out-of-hours Access system and the IPE has said it will also consider round-the- clock dealings.