March 7 (Bloomberg) -- The International Petroleum Exchange, the world's second-largest oil futures market, will shut its trading pits next month, the culmination of a three-year plan to move its contracts onto computer screens.

Floor trading will end April 7 for Brent crude futures, a benchmark for two-thirds of the world's oil, and for gasoil, a refined product used for heating. About 220 people work on the floor of the exchange in London's financial district, IPE spokeswoman Alison Herring said today.

The decision forces traders in the $5 billion-a-day Brent market to follow the move to computer systems or take their business to the New York Mercantile Exchange, which since November has offered a Dublin-based Brent crude contract that's traded face to face. That oil contract will start trading on an exchange floor in London this year.

``It's inevitable that traders will vote with their feet,'' and leave to Nymex, said William Buchanan, a senior energy trader at Standard Bank Ltd. in London who trades from an office at the bank. The IPE ``isn't listening to its clients. Apart from the owners, nobody else thinks it's a good idea. I can't really understand why they are doing it.''

The London Metal Exchange will become the only open-outcry commodity market in London, offering seven metals. It has no plans to stop floor trading. The London International Futures and Options Exchange closed its trading floor in November 2000.

Nymex Competition

The IPE has traded Brent crude since 1988 and was bought in April 2001 by the Atlanta-based Intercontinental Exchange Inc., owned by a group of banks and energy companies. The New York Mercantile Exchange is close to signing a lease in London to open an oil-trading pit, hoping to draw traders and brokers away from the IPE.

Computer trading has made inroads in the world's futures markets. Electronic trading last year surpassed floor-based trading at the Chicago Mercantile Exchange, the biggest U.S. futures market, for the first time, accounting for 57 percent of business. About 62 percent of trading at the Chicago Board of Trade, the second-biggest U.S. futures exchange, is electronic.

The ``decision has been taken to maintain and enhance the competitive position of the IPE as well as to take advantage of the greater acceptance and adoption of electronic trading,'' the IPE said in an e-mailed statement today.

The exchange, based at St. Katherine's Dock, near Tower Bridge along the River Thames, reduced the hours of open-outcry trading to a period between 2 p.m. and 7:30 p.m. starting Nov. 1, the same day Nymex opened the Dublin trading pit. Electronic trading on the London-based exchange takes place from 2 a.m. to 10 p.m. Mondays through Thursdays, finishing early at 8:30 p.m. on Fridays.

New Entrants?

Nymex offers 9 1/2 hours a day of open-outcry trading in Dublin. Open-outcry hours at Nymex's new London site will probably be the same as Dublin's, from 10 a.m. to 7:30 p.m., Samuel Gaer, the chief executive of Nymex Europe Ltd., said last week. The New York-based oil bourse will wind down its Ireland floor once the London pit begins this year.

The IPE temporarily waived some of its transaction fees in November, matching a move by the Dublin exchange. It reinstated fees in January and its chief executive, Richard Ward, said last month his plan to promote electronic trading won't be changed.

``I think you may have some other players coming into the market if everything is electronic,'' said Trygve Vikoren, an oil trader with Norsk Hydro ASA in Oslo.

To contact the reporter on this story: Alejandro Barbajosa in London at abarbajosa@bloomberg.net.

Last Updated: March 7, 2005 10:27 EST