An electronic trading system set up by the International Petroleum Exchange is still being shunned by traders one...
year after its launch.
Oil prices have reached a record high, but the IPE told Computer Weekly that only about 5% of total trades made on oil and natural gas futures contracts are being conducted using the browser-based version of the ICE electronic trading system. The system is running in parallel with traditional open outcry trading.
Traders have the choice of using the Java-based electronic trading system, which integrates with Microsoft Excel spreadsheets. However, the proportion of trades made electronically has not changed significantly since April.
The IPE, Europe’s largest exchange for energy futures and options and the last open outcry pit in the City, handles more than £1.1bn of trades a day.
A spokeswoman for the IPE said traders would continue to use open outcry trading if it was perceived to offer more liquidity - being able to quickly buy or sell an item.
The IPE trading system was developed by the exchange’s parent company Intercontinental Exchange. Advantages of the system include access to international markets, being able to automate the trading cycle - known as straight-through processing - and trading directly without a broker, the IPE said.
Daniel Cohen, managing consultant at PA Consulting Group, said winning the support of traders for an electronic trading system often posed a bigger challenge than developing the technology.
"Smaller traders are often hostile to electronic trading," he said. "A lot of these guys are concerned that it might make them redundant and favour the bigger banks."