World's top firms set to launch online exchange

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The Independent Online

A group of 39 of the world's most powerful companies have clubbed together to form the first open internet exchange. Hosted by CommerceOne, the six-year-old technology group, the club members include General Motors, BT, Citigroup, Deutsche Telecom and NTT Communications.

A group of 39 of the world's most powerful companies have clubbed together to form the first open internet exchange. Hosted by CommerceOne, the six-year-old technology group, the club members include General Motors, BT, Citigroup, Deutsche Telecom and NTT Communications.

Named Global Trading Web (GTW), the exchange is due to be formally launched within two weeks and will bring together the companies with a combined buying power of over $1,000bn (£660bn). It will differ from the glut of established exchanges as it is not just focused on one industry sector.

According to investment bank Goldman Sachs, half of the Fortune 1000 companies are already buying online. And Merrill Lynch estimates that online procurement could rise to $2,500bn by 2003.

In the past 18 months a staggering 600 venture capital-backed exchanges have started trading, leading to fears that the market is becoming saturated and the benefits of online procurement eroded. But GTW backers hope to overcome this by combining up to 72 existing internet markets - including one run by BT that includes Boots, Bass and Powergen - into the exchange.

GTW also differs from other established exchanges as it brings together different industries wanting to make common purchases. This could include stationery, energy and

even recruitment services.

Simon Nicholls, head of supply content at BT division Ignite Application Services, said: "The exchange will give buyers access to goods anywhere in the world."

Members will each have one seat on GTW's board. And he added that checks have been built into the exchange to ensure it will not break European and US competition regulations.

The GTW move comes as Liffe, the futures and options market, is about to make a move into business-to-business (B2B) e-commerce, creating a way of buying all sorts of goods over the net.

Liffe, with its partners Cap Gemini, Blackstone, the US investment fund, and Battery, a B2B exchange operator, are to offer ways of buying products in the future. This means that if a company, say, needs to buy some paper for delivery in nine months' time, it can deal via Liffe, which will guarantee that the contract is fulfilled.

"The crucial element is that you can lock in today's price for delivery in the future," said John Foyle, Liffe's deputy chief executive. "The contracts will be guaranteed with an arrangement through a clearing house such as the London Clearing House [which handles Liffe transactions at the moment]."

The Liffe systems will be at their best for high volumes of transaction, because its Connect technology has been developed for futures and options markets, where thousands of trades every day are the norm.

Mr Foyle expects B2B to be a roaring success, particularly in areas such as electricity and chemicals. He notes that in commodities such as coffee and cocoa, trading in futures contracts is worth anything up to ten times total world output.

The development of B2B futures is the latest restructuring since Brian Williamson, a Liffe founder, returned as chairman. Trading on the exchange floor in the City has now ended, and the group is rapidly winning back much of the business it lost to Eurex, the German-Swiss market that adopted screen trading ahead of Liffe.

The City is now expecting Liffe to float in the next couple of years.

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