An unsettled oil market is grappling with a new challenge: the retreat of Yahoo’s smiley-faced instant message service.
Yahoo Messenger has long been oil traders’ favourite tool for blasting out orders and gossip. But Yahoo on August 5 will change the service in ways that inhibit monitoring chats as required by financial rules. Other message platforms are now wooing traders searching for compliant alternatives.
“It’s a land grab,” said Morgan Downey, a former oil trader who is chief executive of Money.net, a financial information company. “Chat is like oxygen flowing through Wall Street. If you are able to capture that information flow, it’s very difficult to undo.”
The financial world uses a hodgepodge of messaging tools such as Instant Bloomberg and the bank-backed Symphony. Yahoo Messenger, with its jangling chimes and grinning emoticons, debuted in 1998 and quickly caught on with oil traders.
The redesigned version will allow users to “unsend” messages, which troubles energy compliance officers. The London Energy Brokers’ Association said the new Messenger “encrypts all communications such that firms are unable to record this media in a straightforward manner”, adding that its members were “reviewing specialised third party solutions”.
Companies waiting in the wings include Intercontinental Exchange, the owner of London’s oil futures bourse. ICE said users on its instant messaging platform have increased 30 per cent this year to more than 11,000. The oil trading division of Glencore, the Swiss-based commodities company, recently selected the service, ICE said.
CME Group, which also runs an oil exchange, and Thomson Reuters plan to announce they have agreed to connect their two messaging networks to allow traders on each to communicate with one another, the companies said. They identified a “surge” in new messaging account registrations in June as traders prepared for Yahoo’s switch.
ICIS, a market research group, surveyed 58 energy trading companies and found they leaned towards the ICE platform for oil and Thomson Reuters’ Eikon Messenger in European power and gas.
But as August 5 approaches, which service wins is an open question.
Yahoo links banks, brokers, producers, consumers and others in the oil market. Victoria Attwood Scott, global head of compliance at Swiss-based energy trader Mercuria, said: “At the moment it’s not clear what is going to be the best system to enable communication with all those different parties. Anything we use needs to be surveillable and recordable.”
Yahoo is neutral on the structure of oil markets. The California-based company — which is exploring a sale of its core business as part of a separation from its $ 29bn stake in Chinese e-commerce group Alibaba — said oil traders constituted “a small fraction” of Messenger’s users.
ICE and CME derive hundreds of millions dollars of revenue from their oil markets. While their message services allow unfettered negotiations, each eases the execution of orders on its own exchange. For example, CME’s Pivot message system has a feature called parsing, which for certain markets allows users to click on a message to fill in a CME trade ticket.
Yahoo may yet survive in the oil market. GreenKey, a technology company, has developed a computer “skin” that wraps around Yahoo and other message platforms and removes the ability to delete messages.
Paul Christensen, GreenKey chief executive, says: “What everybody wants is a platform that is open, neutral and compliant. That would be nirvana, but it doesn’t exist.”
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