CME to become exclusive electronic trader of NYMEX energy futures and options
NEW YORK – The Chicago Mercantile Exchange Inc. will become the exclusive electronic trader of energy futures and options listed on the New York Mercantile Exchange, the two companies said Thursday.While energy futures and options on crude oil, natural gas, gasoline and other products will still be traded on the floor of the NYMEX, CME will take over all electronic trading of these products both during the floor session as well as before and after it, company executives said in a conference call with reporters. The agreement will last until 2016.”This agreement will provide additional liquidity to the floor and our open-outcry system, and will also significantly expand our international accessibility,” said NYMEX Chief Executive James Newsome.Trading on CME’s Globex technology platform will start in the second quarter of this year on a limited basis, expanding to more NYMEX products in the third quarter, including all energy contracts as well as metals contracts.Additional terms of the deal, including any potential financial considerations, were not disclosed.The arrangement gives the CME a ready-made entry into the burgeoning energy markets at a time when it was reportedly considering offering its own energy contracts to rival the NYMEX’s, which are the industry’s benchmarks. As part of the deal, the CME will abandon its efforts to create rival contracts.”Clearly, we had said publicly, the CME was going to be in the energy space in a very short period of time,” said CME Chairman Terry Duffy. “We had a host of different alternatives in the way which we could proceed, and the CME decided working with NYMEX was the best choice.”The new pact also addresses NYMEX’s pressing need to improve its electronic systems. Floor trading of NYMEX energy contracts increased 28.3 percent since 2003. Electronic trading, however, surged 128 percent in just the first quarter of 2006.”This agreement with CME allows us to reach a true global scale more quickly than we could have on our own,” said Mitchell Steinhause, chairman of NYMEX. Steinhause said NYMEX was prepared to launch its own technology upgrade, but that a deal to put NYMEX futures on CME’s technology was preferable.The deal also helps the two long-standing exchanges fend off newer rivals, such as the Intercontinental Exchange Inc.The NYMEX and CME had a similar arrangement from June 2002 through November 2005, in which a handful of NYMEX contracts were traded on CME’s Globex system, though the two sides let that lapse after failing to come up with an extension agreement.Shares of the Chicago Merc rose $4.68, or 1.1 percent, to $448.53 on the New York Stock Exchange. NYMEX is privately held, though it intends to become a publicly traded company as well. Shares of the Intercontinental Exchange fell $2.99, or 4.8 percent, to $59.84 on the NYSE.