International Petroleum Exchange
Encyclopedia
The International Petroleum Exchange, based in London
, was one of the world's largest energy futures and options exchanges
. Its flagship commodity, Brent Crude
was a world benchmark for oil prices, but the exchange also handled futures contract
s and option
s on fuel oil
, natural gas
, electricity
(baseload and peakload), coal contracts and, as of 22 April 2005, carbon emission allowances with the European Climate Exchange
(ECX).
The IPE was acquired by the IntercontinentalExchange
in 2001. The IPE was an open outcry
exchange until 7 April 2005, when its name was changed to ICE Futures and all trading was shifted onto an electronic trading platform
.
became a fundamental feature of the market, short-term physical markets rapidly evolved, and the need to hedge emerged.
A group of energy and futures companies founded the IPE in 1980, and the first contract, for gas oil futures, was launched the following year. In June 1988, the IPE successfully launched Brent Crude
futures. Volumes rapidly took off, and the Exchange has experienced incremental growth, year-on-year for almost its entire history. New trading instruments such as swap
s, futures, and options have grown up. The modern business, though complex, is efficient, flexible, and fast moving.
Since its inception, oil futures and latterly options have been traded in pits on the market floor using the open outcry system. As business volumes have grown, the IPE has moved location several times to accommodate new pits and more traders.
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, was one of the world's largest energy futures and options exchanges
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...
. Its flagship commodity, Brent Crude
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...
was a world benchmark for oil prices, but the exchange also handled futures contract
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
s and option
Option (finance)
In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
s on fuel oil
Fuel oil
Fuel oil is a fraction obtained from petroleum distillation, either as a distillate or a residue. Broadly speaking, fuel oil is any liquid petroleum product that is burned in a furnace or boiler for the generation of heat or used in an engine for the generation of power, except oils having a flash...
, natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
(baseload and peakload), coal contracts and, as of 22 April 2005, carbon emission allowances with the European Climate Exchange
European Climate Exchange
The European Climate Exchange manages the product development and marketing for ECX Carbon Financial Instruments , listed and admitted for trading on the ICE Futures Europe electronic platform. It is no longer a subsidiary of the Chicago Climate Exchange but rather a sister company...
(ECX).
The IPE was acquired by the IntercontinentalExchange
IntercontinentalExchange
IntercontinentalExchange, Inc., known as ICE, is an American financial company that operates Internet-based marketplaces which trade futures and over-the-counter energy and commodity contracts as well as derivative financial products...
in 2001. The IPE was an open outcry
Open outcry
Open outcry is the name of a method of communication between professionals on a stock exchange or futures exchange. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders...
exchange until 7 April 2005, when its name was changed to ICE Futures and all trading was shifted onto an electronic trading platform
Electronic trading platform
In finance, an Electronic trading platform is a computer system that can be used to place orders for financial products over a network with a financial intermediary. This includes products such as shares, bonds, currencies, commodities and derivatives with a financial intermediary, such as a...
.
History
Until the 1970s, the price of oil was relatively stable with production largely controlled by the biggest oil companies. The 1970s transformed the industry forever. Two oil price shocks meant that price volatilityVolatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
became a fundamental feature of the market, short-term physical markets rapidly evolved, and the need to hedge emerged.
A group of energy and futures companies founded the IPE in 1980, and the first contract, for gas oil futures, was launched the following year. In June 1988, the IPE successfully launched Brent Crude
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...
futures. Volumes rapidly took off, and the Exchange has experienced incremental growth, year-on-year for almost its entire history. New trading instruments such as swap
Swap (finance)
In finance, a swap is a derivative in which counterparties exchange certain benefits of one party's financial instrument for those of the other party's financial instrument. The benefits in question depend on the type of financial instruments involved...
s, futures, and options have grown up. The modern business, though complex, is efficient, flexible, and fast moving.
Since its inception, oil futures and latterly options have been traded in pits on the market floor using the open outcry system. As business volumes have grown, the IPE has moved location several times to accommodate new pits and more traders.