ENERGY e-TRADING SURVEY
more of their flows to e-channels? Do users of energy platforms want to see pre-trade, execution, and post-trade functionalities seen elsewhere? Do these expectations differ based on user profile and trading purposes?
Selected Highlights
Leadership Up For Grabs There was no clear winner among existing
energy platforms and the door is open wide for competition. ICE was selected by most respondents, while the second most common choice was ‘Others’ – the category which included GlobalVision, IG, and RediPLUS. The top dealers: ICE, ICAP and GFI are clustered
extremely closely reflecting the lack of a dominant player, although a closer look at trading patterns reveals a slightly better position for GFI’s EnergyMatch platform, especially in Europe. The study asked about the frequency of platform use, and on this measure, EnergyMatch gets the most responses.
Execution Features of e-Trading Platforms Among the usual suspects for trading platforms
respondents selected tight spreads and deep liquidity as the features most important to them and, at the same time, exhibiting the biggest deficiency with the users’ expectations. Interestingly, in the more mature electronic FX market, all the top player have
Execution Features Feature Importance
5 4 3 2 1
Level of Satisfaction
Source: Lab49 / Commodities Now Energy e-Trading Survey, 2012
features that got low importance grades from users. This could be related to the fact that with the no deep liquidity for many energy products on energy platforms, users prefer tried and tested voice channels for executing block trades to breaking orders into smaller chunks. However, as the trading of many commodity OTC derivatives moves to swap execution facilities (SEFs) and organised trading facilities (OTFs) users may start relying more on execution algos.
Finally, the availability of The majority of survey respondents [80%] trade
multiple energy products and understandably want the convenience of trading on the same platform
strong fundamentals of price, latency and liquidity, and seek differentiation in other features. Most existing energy e-trading platforms offer
both electronic and voice-brokered execution and this reflects satisfactory marks given by users to the availability of price RFQs, executable streaming prices, and hybrid booking strategies. Users were clearly dissatisfied with the non-
availability of all energy products on a single platform in current energy e-trading offerings. This is not surprising considering that the industry is no longer dominated by the corporate hedgers and CTAs who tend to transact primarily in a single energy product. The majority of survey respondents [80%] trade multiple energy products and understandably want the convenience of trading on the same platform. Two execution features were rated low importance
– one is likely to become important, but the other probably not. First is advanced execution algo
other asset classes on the energy e-trading platform also received low importance rates, which could be due to the fact that 46% of respondents do not
trade other asset classes. Among those who do, FX is by far the most popular choice, followed by equities and rates. These results confirm that portals should approach cross-asset capabilities cautiously and selectively.
Electronic Volume Expectations An overwhelming majority of respondents expect
the volume of energy transactions they execute electronically to go up in the next three years. Electronic execution is clearly the future and both regulations and growing familiarity with this trading channel play to the trend. As the industry switches to this channel (even on a non-exclusive basis) liquidity deepens and electronic trading enters a virtuous, self-reinforcing circle. These expectations factor in the likely mandate to trade many OTC commodity derivatives on SEFs, despite the relative complexity and variety of commodity instruments.
June 2012 27
Deep liquidity Tight spreads
Both listed and OTC on a single platform All energy products on single platform
Price RFQs Executable streaming prices Low latency
Hybrid booking strategy Advanced booking algoes Other asset classes on platform
Execution Feature Score
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