Why is the International Petroleum Exchange in London?

Question

If you could include a link to a site explaining, that would be fantastic!

Answer 1

They are located in the UK because they trade Brent crude....the oil from that region. Here's more info:

The International Petroleum Exchange, based in London, is one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude is a world benchmark for oil prices, but the exchange also handles futures contracts and options on gas 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 April 7, 2005, when its name was changed to ICE Futures and all trading was shifted onto an electronic trading platform.

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 volatility 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 swaps, 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 increasing number of traders.

Since 1997 the ICE Futures has expanded its offerings from Brent Crude and Gas Oil to include Natural Gas (1997), Electricity (2004), and ECX carbon financial instruments (2005). These expansions have meant that the ICE Futures can now offer a full spectrum of energy products. More advanced transactions are also now possible, due to cross and multi-product transactions, which eliminate the need to use multiple markets or an adviser.