Several years ago, when I was trading natural gas for Amerada Hess, you had basically one channel on which to do business, the phone.  At that time, Altra was starting to get traction with the on-line exchange concept, but their contract was so onerous that it was limiting their acceptance (the contract at that time literally demanded that you stand in front of your board of directors and read aloud a passage that laid out your financial and operational responsibilities!).  ICE had not yet been born and a few other online exchanges were trying to develop, but none successfully. 
Fast forward a few years and now you’ve still got the phone playing a role, however if you look at the typical trading operation, ICE had about the same amount of traffic (in terms of deals done) as the phone.  Additionally, you’ve got the new kid on the block, Instant Messenger.  Based on a bit of informal research that I did recently, it now appears that IM is on an equal footing with the phone and ICE as a deal making channel.  It's pretty easy to see why.  IM allows every trader to establish a peer to peer exchange with their trading partners.  You can post your bids and offers onscreen or you can hit others' bids and offers.  Of course, it does have a few “holes”:  being unstructured, there’s no mechanism that confirms when a deal is hit, so an offer may not be valid a few seconds after being posted; the informal nature of the IM conversations can lead to misunderstandings as to what exactly is being offered; and there’s not a mechanism for capturing the deal into other systems for generation of confirmations, ETRM deal entry, etc. 
Of course these same issues exist for phone trading. But for exchange based trading, on systems like ICE, these issues are non-issues.  The system enforces rules for posting and for executing; and it also allows you to bring your trades into your ETRM system if you’ve taken advantage of their interface.  Basically, it applies structure to what had been a fairly unstructured process.
So, what if someone could make IM trading as reliable and efficient as exchange based trading, enabling the peer to peer model, and allowing a trader to capture, analyze, and post deals over an IM client?  It would be pretty interesting, wouldn't it?
Well, someone has created a real IM based trading product, and it is very interesting, and I'll tell you more about in the coming weeks…
Patrick

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