Death of the floor trader

Traders at the London Metal Exchange are the UK's last remaining floor traders

Second-hand clothes shops may soon be inundated with a crop of multi-coloured blazers.

Floor traders - renowned for wildly waving brightly-clad arms around whilst loudly gesticulating their "buy/sell" requests - are a dying breed in the UK.

One of our greatest vulnerabilities was the failure to put in place an electronic trading system

Richard Ward
IPE Chief Executive

London's prestigious International Petroleum Exchange (IPE) on Monday became the latest exchange to bow to the pressures of modern technology when it was taken over by upstart exchange InterContinentalExhange (Ice).

And news of this takeover means that up to 200 floor traders will be hanging up their blazers for the last time.

Great Britain is now only home to one open outcry pit, with just 60 traders or so surviving at the London Metals Exchange (LME).

Steady pilgrimage

The pilgrimage to electronic trading systems has been slow but steady over the last few years.

The London Stock Exchange made its move at the time of the "big bang" way back in 1986, while the Liffe Exchange closed its last pit in November 2000 after a two year transition period.

IPE traders will have to adjust to the web

The last surviving open outcry floor is at the LME, which has equipped itself for all eventualities, creating an electronic trading exchange which runs simultaneously alongside telephone and floor trading.

And it is leaving it up to the traders themselves to decide whether they prefer the traditional or the new-fangled trading model.

"It's up to the traders. The market will tell us what they want us to do," a LME spokeswoman told BBC News Online when asked whether there were any plans to shut down the pit.

Takeover plot

When the IPE waves goodbye to its floor traders it is not only ending a tradition, but also the way it has done business for the past 12 years.

While other exchanges have managed to transform themselves and successfully enter the digital era, Europe's largest energy exchange became the victim of a takeover plot.

About 200 traders will be hanging up their blazers for the last time

The IPE seemed all-powerful, boasting North Sea Brent crude oil futures - the contract which is used as the benchmark for oil prices around the globe, setting new records for volumes of trade this month.

But its somewhat limited advance into electronic trading was the main reasons why it changed from becoming the market leader to a takeover target.

"Our greatest vulnerability was the failure to put in place an electronic trading system," the IPE's chief executive Richard Ward told BBC News Online.

Mr Ward explained that the exchange decided to seek a partner to form a trading platform rather than develop its own, considering the offers of Ice and Liffe out of 50 potential electronic suitors.

A large majority of shareholders elected Ice, added Mr Ward, saying that its $67.5m offer was "substantial and attractive".

Surrendered independence

The takeover is likely to be controversial for more reasons other than the end of floor trading.

The reality is that no one company will dominate the exchange

Jeffrey Sprecher
Ice founder

Although Mr Ward stresses that the IPE will continue to operate as a subsidiary of Ice, it is to surrender its independence and be owned by a consortium of oil companies and banks including BP, Shell and Goldman Sachs.

This has been compared to Microsoft buying a stake in Nasdaq, or General Electric in the New York Stock Exchange.

Smaller players are afraid that those with a stake in the exchange will get preferential treatment, although this is fervently denied by those involved.

The oil companies are not technically doing anything wrong, but, as one observer said, "something just doesn't smell quite right".

One man show

The Ice was a little known energy exchange that was founded to trade electricity in Atlanta.

But from this inauspicious start, it managed to convince some of the biggest energy traders in the world that it had the technology to transform the energy markets.

"I was the sole owner of a digital platform with no volume," Ice founder Jeffrey Sprecher told BBC News Online, "I attracted the marketplace to the platform."

"The reality is that no one company will dominate the exchange," said Mr Sprecher.

Ice has traded more than $100bn worth of energy and metals online since it was launched eight months ago.

The newly-enlarged Ice-Ipe is on track to ring up daily trades of $3.5bn.