Group to Create B2B Exchange for Energy, Metals

FRAMINGHAM (03/21/2000) - A group of leading U.S. and European investment banks and energy firms have combined to launch Intercontinental Exchange, an Internet-based electronic marketplace to trade over-the-counter energy, metals and other commodities.

The group includes BP Amoco; Deutsche Bank AG; Goldman, Sachs & Co.; Morgan Stanley Dean Witter; Royal Dutch/Shell Group; SG Investment Banking, a subsidiary of the Societe Generale Group; and Totalfina Elf Group. The companies didn't disclose how much equity each firm will have in the new venture. The combined investment among the partners is $20 million, said a spokeswoman for the exchange.

Later this year, the exchange will begin trading in energy products and precious metals, including petroleum and gold. Eventually, the exchange plans to expand its over-the-counter offerings to other commodities, including natural gas, electrical power and other base metals.

According to a statement issued by the companies, there will be no "memberships in the exchange and no dues or fees beyond those incurred in the process of trading." Participation will be open to all commercial market participants.

Currently, most trading in the $1.8 trillion wholesale over-the-counter energy and metals market is conducted via telephone trading networks. "This new B-to-B e-commerce portal promises commercial participants in the commodities markets access to a more efficient marketplace than currently exists," said Gary Cohn, global head of commodities at New York-based Goldman Sachs.

The exchange will be headed up by Jeffrey Sprecher, currently president and chief executive officer of Atlanta-based Continental Power Exchange Inc., the company developing the trading system to be used by Intercontinental Exchange.

"Given the names of the companies involved, this (portal) is aimed at institutions and high-worth type investors," said Alan Alper, an e-commerce analyst at Lincoln, Mass.-based Gomez Advisors and a former Computerworld editor. Today, said Alper, "almost anything is suitable to trading online, so why not devise an instrument made up of commodities? This exchange is the next interaction of the evolution of the financial services market. Commodities are global in nature and the Internet is the perfect medium to do this."