Neutrality at the structured desk sets new marketplace apart

Dana Bacciocco, Associate Editor

While Enron picked up the pieces of its energy trading business, and ICE scooped up a majority of the disenfranchised players, E-lecTrade boldly opened the doors to it’s new trading desk. E-lecTrade Inc.’s neutral, anonymous online transaction platform for structured electricity went live on December 10, 2001, in power markets throughout the Northeastern United States.

Liquidity in some regional power markets where Enron was a big player seems to have suffered; but, so far, there hasn’t been a significant seizure in any power market, according to ESAI.

“We also had designed our system to do standard products,” said E-lecTrade’s founder and CEO, Dr. Anil K. Suri. “Now there’s more interest in that than there was before the Enron situation, because people have lost a dominant platform.” ICE has a similar issue of non-neutrality, in a more distributed sense, said Suri. There are a few large players who compose most of the counterparties in transactions.

Suri believes E-lecTrade will see more volume in standard products because of the Enron situation, and they are set up to handle it. Not being technology-limited, E-lecTrade is ready to grow as fast as business grows, “in terms of the comfort zone of transactions for clients.”

The E-lecTrade neutral online “structuring desk” allows complex, forward-looking transactions for structured electricity products to be negotiated anonymously. E-lecTrade’s transaction structuring and proprietary analytics allow participants to sharply reduce transaction costs-from 10 percent to below 1 percent of total transaction cost-for complex electricity products. In the U.S., such transactions are estimated to grow to more than $25 billion over the next three years.

Structured transactions-including sophisticated ShapedPower electricity products-account for 50 percent of all power traded in the U.S., with the balance traded as standard blocks.

“Even without the recent issues related to Enron, market conditions make E-lecTrade’s bulk structured power capability quite attractive. Utilities and other participants are now able to use this marketplace to pursue competitive advantage and better risk mitigation through structured electricity transactions on a level playing field,” according to Ethan Cohen, Aberdeen Group Inc. senior energy analyst.

Dr. Suri told EL&P that “our strategy is to bring more and more transactions into the public arena,” meaning visible by everybody logged into the system. Startup consisted of having clients define portfolios and input transactions. And “Clients have input more power portfolios yesterday and today than I’d hoped for,” said Suri. “ellipse I really expect that our liquidity would pick up over time and I think we would be liquid-I would define it as self-sustaining transactions-probably by beginning of February.” At that point there would be sufficient transactions flowing through the system to accommodate transaction matches quickly.

“The E-lecTrade vision is to bring liquidity and cost-efficiency to the structured energy transactions, using the same neutrality and anonymity that produce better prices, lower expenses and the higher degree of orderliness found in the best commodity and financial markets,” said Suri.

Suri can be reached at aksuri@e-lectrade.com.

Previous articleELP Volume 80 Issue 2
Next articleNuera wins contract with Grant County Public Utility District

No posts to display