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Enron Mail |
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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Cindy Derecskey X-To: Steven J Kean, Richard Shapiro X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf ----- Forwarded by Cindy Derecskey/Corp/Enron on 10/12/2000 01:01 PM ----- Kal Shah@ECT 10/12/2000 11:31 AM To: Mark Palmer, Karen Denne/Corp/Enron@ENRON, Meredith Philipp/Corp/Enron@ENRON cc: Subject: EnronOnline: ENRONONLINE-STYLE TRADING PLATFORMS COULD HARM MARKET, ALTRA OFFICIAL SAYS fyi. Kal ELECTRONIC TRADING ENRONONLINE-STYLE TRADING PLATFORMS COULD HARM MARKET, ALTRA OFFICIAL SAYS Mark Davidson, Lincolnshire, Ill. 09/15/2000 Inside F.E.R.C.'s Gas Market Report 4 (Copyright 2000 McGraw-Hill, Inc.) Officials from the two predominant electronic gas trading systems squared off this week after the head of gas trading for Altra Energy Technologies Inc. accused proprietary systems such as EnronOnline of being ``potentially dangerous to the long-term health of the industry.'' Scott Coleman, Altra's director of natural-gas trading systems, told Interchange Energy Group's LDC Forum in Lincolnshire, Ill., that proprietary systems -- those run by market participants -- have the ``potential for short-term price manipulation'' by the operators, which typically set the bid/ask spreads and are on either the buy or sell side of every deal. And because those systems don't provide anonymity -- the operator knows the counterparty's identity as soon as a deal is consummated -- they allow the operator to gain market intelligence by monitoring the trading patterns and market positions of its competitors, Coleman asserted. While acknowledging that he is ``slightly biased'' toward independent systems such as his company's Altrade, Coleman said he fears that if one proprietary system gains too big a share of the electronic trading market, ``I think you can draw the conclusion that they will be able to control markets short term.'' However, ``long term, the market always corrects itself.'' Coleman did not assail EnronOnline specifically, although he did note that Enron Corp.'s eight-month-old trading platform is by far the largest proprietary system and is growing rapidly -- mainly because it's free of charge and simple to use with its ``one-click'' approach to price discovery and spot dealmaking. Coleman argued that independent electronic platforms such as Altrade -- most of which charge a transaction fee -- are more reliable because they essentially act as third-party brokers, matching up anonymous traders that set the bid/ask spreads themselves. Altrade, unlike EnronOnline, does not take a market position or assume title to gas traded on its system. EnronOnline Director Bob Shults rebutted Coleman's assertions regarding proprietary systems. ``We provide liquidity in the marketplace. . . . I don't think it's detrimental to the gas business at all,'' he insisted. ``I don't think Enron has the ability to move markets; you don't have the market manipulation that [Coleman] alludes to.'' Shults maintained that if competitors thought price manipulation was occurring, they would bail out immediately. Instead, competitors' use of EnronOnline is soaring; the system now performs about $1 billion/day in transactions, much of it in the gas and power sectors. ``We put the bid/ask spread out there and if you like it, you can use it. If you don't like it, you don't,'' Shults added. Asked if EnronOnline tracks its competitors' trading patterns in order to gain an upper hand in the market, Shults simply answered, ``No.'' Dennis Cornwell, senior vice president of risk management and trading for Conoco Gas and Power Marketing, said his company -- which now does about 15% of its gas deals electronically -- welcomes both proprietary and independent systems and spreads out its trading activity among EnronOnline, Altrade and other platforms. Cornwell, however, acknowledged that Conoco limits the number of deals it does on any proprietary exchange in part because of the concerns Coleman expressed. Meanwhile, Coleman asserted that a third type of e-commerce platform, consortium exchanges, aren't likely to succeed in the gas and power industries because of regulatory concerns about antitrust violations and because similar multifirm exchanges in other industries have ``failed to materialize'' after being announced. Also, Coleman cited the difficulty of several large companies ``agreeing on how to operate.'' Several consortium systems have been proposed in North America, including IntercontinentalExchange, an Internet trading platform founded by BP, Royal Dutch/Shell Group, Totalfina Elf Group and four financial investment firms and subsequently joined by six major gas and electricity marketers (IFGMR, 4 Aug, 20). As for electronic trading as a whole, Shults, Cornwell and Coleman all agreed that while it won't entirely replace conventional methods, it will become the dominant way of buying and selling gas and electricity within a few years. Coleman said electronic trading ultimately results in saved time, lower prices, better price discovery and ``just plain competition for the traders' attention span. It's going to be tougher to get a trader on the phone. This may depersonalize the business a little bit, but that is the way it's going to go.'' But Coleman added that the proliferation of electronic energy commerce will create a whole new set of job opportunities. ``The human being will be what holds all of this online trading together,'' he said. The speakers also agreed that most of the 20 or so electronic platforms operating or in development aren't likely to survive the intense competition and will either go out of business or be absorbed by another company within a couple of years. Folder Name: EnronOnline Relevance Score on Scale of 100: 95 ______________________________________________________________________ To review or revise your folder, visit http://www.djinteractive.com or contact Dow Jones Customer Service by e-mail at custom.news@bis.dowjones.com or by phone at 800-369-7466. (Outside the U.S. and Canada, call 609-452-1511 or contact your local sales representative.) ______________________________________________________________________ Copyright © 2000 Dow Jones & Company, Inc. All Rights Reserved
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