Keys to unlocking a booming exchange: Is it the exchange model or the battle for liquidity?

摘要

As dust settles on several folding and flopped trading platforms (the likes of Red Meteor, HoustonStreet and such) there's a new rivalry growing in town, namely a head-to-head duel between consortiums, independents, brokers and proprietary systems. Call it the future battle-front of the dueling exchange models. And if the model and the battle for liquidity are the proverbial keys to the e-market kingdom, what can be gleaned from past e-market experiences, counterparty credit risk botches and high-tech, high-dollar exchange failures of the past? "Although we knew it at the beginning, the market has learned through the Enron experience that the 'private' or 'proprietary' exchange is merely an e-transformation of a trading floor and is a flawed model. It aggregates risk with one counterparty while dispensing valuable counterparty information. The true independent model remains the best in theory, but has the greatest problem developing liquidity... Most likely we overestimated the 'commoditization' of the energy markets. The consortium model falls in the middle with a spreading of the risk and more liquidity compared to the standalone systems," explained David Hanson, COO of EnMO Limited, a joint venture company owned by National Grid and Altrade UK Management, which manages the OCM [on-the-day commodity market] electronic gas trading platform in the U.K. Peter Fusaro, President of New York-based Global Change Associates Inc., commented on the variety of e-bombs and boons: "Altra had a good model, but then they went crazy and bought QuickTrade, and TransEnergy. Houston-Street's model was never viable. They were never big; big pizzazz but a total failure. Tradespark has Williams and some others but they're just there. Now ICE [IntercontinentalExchange] has the market-making power, they've got 13 members who are powerhouses in trading."