UPDATE 1-TSX Group enters energy trading alliance with ICE

Wed Mar 28, 2007 4:48pm BST

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TORONTO, March 28 (Reuters) - TSX Group (X.TO), owner of the Toronto Stock Exchange, and IntercontinentalExchange Inc. (ICE.N) said on Wednesday they have formed an alliance for trading and clearing natural gas and electricity contracts.

Terms of the deal were not disclosed but the two companies said in a joint statement that the terms are "not expected to be material" for either company in 2007.

The alliance is due to start in the third quarter of 2007.

Under the deal, the ICE platform will carry contracts from ICE as well as ones offered by Natural Gas Exchange Inc., a subsidiary of TSX. The Natural Gas Exchange will clear the trades.

According to NGX, which the TSX bought in 2004, the alliance will provide greater liquidity for its customers.

"One of the elements that is absolutely critical to any market, and particularly the energy markets, is liquidity," Peter Krenkel, president of NGX, said on a conference call.

"And certainly on the Canadian side of the business we'll be moving very quickly to combine our liquidity, the liquidity we have on NGX, coupled with the volumes that ICE holds."

TSX Chief Executive Richard Nesbitt, who said he spent the past year planning the alliance with Atlanta, Georgia-based ICE, said the idea of equity changing hands between the two companies was never considered.

"What we need is strong partners to build our business and I think that's what we're seeing with our partners," Nesbitt said on the conference call. "And there's no need to have equity change hands in order to do that, although I wouldn't rule anything out for the future."

TSX said earlier in March it will partner with U.S-based International Securities Exchange Holdings Inc. ISE.N to launch a Canadian derivatives market to compete with the Montreal Exchange.

The new exchange, which will be launched in March 2009, when a noncompete agreement with the Montreal bourse expires, and will list and trade options, futures and options on futures on a range of Canadian securities.

(Additional reporting by Haitham Haddadin in New York)

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