ICE's WTI launch divides trader opinion

Crude oil traders and brokers voiced scepticism over the IntercontinentalExchange's new electronic West Texas Intermediate (WTI) crude futures contract launched on February 3.

"I can't see it getting the necessary liquidity to make it work," says a broker with a European commodity brokerage. "People go where the liquidity is, and it's with Nymex," he adds.

Almost 200,000 light, sweet crude contracts - commonly know as WTI - change hands at the New York Mercantile Exchange a day, making it the most liquidly traded commodities contract. It trades as an open outcry contract during Nymex pit hours, and also trades electronically on Nymex's out-of-hours trading platform Access.

"People like the fact WTI is open outcry, but if they want to trade electronically they can do so on Nymex Access," notes a trader at a European oil company.

However, others disagree. "Now Brent (ICE Futures benchmark crude contract) is electronic I think there's a lot of traders who feel the floor is slow now," says another broker.

"Following the success of ICE Future's electronic Brent crude futures contract, customers began seeking the ability to trade WTI electronically as well," says ICE spokesperson Kelly Loeffler.

The ICE WTI contract will offer longer electronic trading hours, trading continuously for 21 hours a day. The rest of its specifications are similar to its Nymex counterpart, but it is cash-settled. ICE currently offers an over-the-counter WTI Crude Oil Bullet swap contract, and the open interest on this contract will be converted over to the WTI futures contract. A fee waiver on execution will be in place for the ICE WTI Crude futures contract from launch through March 31, 2006 and there will be cross margining benefits for traders of ICE Brent/WTI.