Electronic Energy Market - ICE Global Electronic Energy Futures Market
Electronic trading and the electronic energy market is nothing new, in fact electronic trading markets have been operational for more than a decade. But what a difference a decade makes.
In an outdated white paper written by Satu Parikh and Gerald Lohse (Circa 1995) of the Wharton Business School, it was theorized that electronically traded commodity platforms didn't have the information bandwidth provided by the human element of pit trading using open outcry.
Today, it's virtually impossible for pit traded open outcry markets, which are limited to the relatively small number of traders in the pits, to communicate global price and market information using hand signals and verbal communication when compared to the information available via today's electronic trading platforms.
Regardless of the opinion held by pit traders that open outcry is the preferred and more efficient method for transacting commodity trades, the fact is more contracts on almost every global commodity exchange are now traded electronically than using pit traded open outcry.
An example of an electronic energy futures market is The Intercontinental Exchange, aka The ICE.
The ICE uses a proprietary electronic trade execution platform known as WebICE to provide access to its benchmark energy futures contracts. These include Brent Crude, West Texas Intermediate Crude and North American OTC markets in natural gas and power.
The ICE electronic trading platform can be served up securely via the Internet and powered by the Java plug-in or through front-end providers and even API's.
A liquid commodity market requires both hedgers and speculators, preferably in large numbers who provide varied pricing decisions for market liquidity. With hundreds of thousands of electronic energy contracts traded through ICE on a daily basis, these markets are extremely liquid.
It's also important to maintain market transparency or the disclosure of all trading activity. This is accomplished by an electronic file of all trades.
With today's secure browser based commodity trading platforms which provide liquid and transparent commodity pricing information in real time, more and more futures contracts will be traded electronically. This will leave less and less commodity futures trades transacted in commodity trading pits using open outcry.
The ICE also offers trading in a wide range of other financial and soft commodity contracts through its subsidiaries like ICE Futures US and provides state of the art clearing capabilities with its clearing house ICEClear. For more information, visit the ICE website HERE.
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