NYMEX: We have invented the wheel

Discussion in 'Financial Futures' started by daddyeaux, Feb 6, 2006.

  1. Nymex joins electronic revolution
    >By Kevin Morrison
    >Published: February 6 2006 19:10 | Last updated: February 6 2006 19:10
    The New York Mercantile Exchange has always done business its own way. Over the past two years it has pursued a global strategy of opening up satellite energy futures trading floors as the world’s other futures markets were going increasingly electronic.

    Now, Nymex appears ready to accept that electronic trading is the future. Any day, it is expected to announce formally that it will introduce electronic trading alongside its pit trading this spring.

    Nymex shareholders say that the move mirrors that of the Chicago Mercantile Exchange and the Chicago Board of Trade, which have both introduced electronic trading side by side with their pit trading. The CME introduced electronic trading in 1990 and the CBOT in 2000, and it now accounts for about 70 per cent of business on both exchanges.

    Although Nymex insiders claim that the issue has been debated for some time at boardroom meetings, the admission last week by Nymex shareholders that the exchange intended to introduce parallel trading follows a week in which competitors increasingly encroached on its turf. Its closest rival, the IntercontinentalExchange (ICE), the Atlanta online commodities exchange, last Friday launched an electronic version of West Texas Intermediate, the world’s most prominent oil futures contract and the flagship contract for Nymex.

    “This was not prompted by ICE, but it has been under discussion for months,” said one Nymex shareholder. “In fact the pressure came from the floor, where many of the floor community thought that it was a good idea to have the two together as it may create more liquidity.”

    The launch has also stirred up a debate about regulation of the WTI contract, which is the world’s most popular reference price for oil. ICE launched its new contract through its UK arm, ICE Futures, formerly the International Petroleum Exchange, which is regulated by the UK’s Financial Services Authority.

    Nymex shareholders say that this gives ICE an unfair advantage because the FSA does not place an upper limits on investors’ holdings of energy contracts, whereas the US Commodity Futures Trading Commission has imposed limits. Nymex has threatened to move its electronic trading business to London in order to compete with ICE under the same regulations.

    “Moving the [electronic trading] business offshore is a real issue and something the board is looking at very closely,” said the shareholder. “However, we don’t want to get into a row with the CFTC because that will not be good for business.” James Newsome, Nymex president, was formerly the CFTC chairman. Nymex has a trading floor in London, which was opened last year after ICE closed its London oil futures trading pits where its premier contract Brent crude was traded.

    However, Nymex’s Brent volumes have been poor because many former London-based floor traders have migrated their oil trading activities to the screen.

    On its first day, ICE’s new product traded more than 38,000 contracts, or about 10 per cent of Nymex’s daily volume for its WTI contract. The launch came three days after Craig Donohue, CME chief executive officer, said the exchange was finalising its energy markets strategy.

    “We believe there is a lot of growth opportunity in the energy market, particularly related to electronic trading,” said Mr Donohue.

    CME and Nymex fell out last month when talks about the CME buying a 10 per cent stake in its rival broke down.

    A non-compete clause between the two ends on June 6, leaving the CME free to pursue its energy strategy. “They [CME] are very serious. They see energy as the missing piece in their suite of products,” said one industry consultant.

    The increased competition for Nymex comes when shareholders of the exchange, which is 134 years old, are considering the sale of 10 per cent of the exchange to private equity group General Atlantic for $170m.

    Shareholders have yet to vote on the proposed partial sale to General Atlantic, which increased its original offer by $35m.

    “Nymex has a lot of issues up in the air – the threat of CME coming in, ICE launching WTI and the General Atlantic deal. It is sending them into panic mode,” the industry consultant said.

    Additional Reporting by Doug Cameron
  2. Word is that the board voted on this today.
  3. CME should just team up with ICE somehow. I have heard (though not experienced) that the ICE systems are not 100% reliable - so CME partnership could build confidence.

    CME+ICE would probably be a stronger competitor to NYMEX, rather than CME, ICE and NYMEX in a 3 way competition.
  4. FredBloggs

    FredBloggs Guest

    this is the death bell for nymex thank god.

    they have lost the plot.

    cbot grabbed gold & silver futures and put them upstairs.

    ice/ipe are doing the same and showing the way forward.

    i think nymex are too late. the others have already grabbed market share and made headway.
  5. nymex probably will sell CME a 10% stake and let them take them electronic...Globex is best in the world.....

    its so funny, i cant beleive they pay someone hefty amounts of cash to think of ways to keep them open outcry, dont know who's more stupid, the board or the CEO/head etc.....

    ICE has a lot of problems.... i gained a 5lot position over night as the server hadnt picked up my exit 4 hours early, was short 40, but must have clicked 45 but it showed me square when i left the office...came back next money and had dropped 5000..... but nevetheless they are the best of a bad bunch and the only way u can trade energy electronically.....i hope they launch heating oil and unleaded futures, that will really give NYMEX the shits..
  6. I understand that CME and Nymex currently have a non-compete agreement in place that expires in June. I imagine there are few people in Chicago watching the success of the ICE's WTI contract with great interest, especially if the CFTC is unable to enforce Nymex's monopoly.
  7. Xenia


    NYMEX to List Energy Futures Contracts on CME Globex(r) Platform Through 2016

    NEW YORK and CHICAGO, April 6, 2006 -- NYMEX Holdings, Inc., parent
    company of the preeminent physical futures exchange, and CME, the
    world's largest and most diverse financial exchange, announced today
    that they have signed a definitive technology services agreement under
    which CME will become the exclusive electronic trading services provider
    for NYMEX's energy futures and options contracts. Access to electronic
    trading of NYMEX products will be available virtually 24 hours a day on
    the CME Globex(r) electronic trading platform.

    Initial trading of NYMEX energy products on CME Globex, currently
    scheduled to begin in the second quarter of 2006, is expected to include
    side-by-side trading of NYMEX standard-sized and NYMEX miNY(tm) energy
    futures contracts for crude oil, natural gas, heating oil and gasoline
    with NYMEX's floor-based products during open outcry trading hours and
    when the NYMEX trading floor is closed. In the third quarter, all
    products trading on NYMEX ACCESS(r), the exchange's after hours
    electronic trading platform, are expected to transition to CME Globex.
    Also under the terms of the agreement, CME Globex will be the exclusive
    electronic trading platform for metals products currently listed on the
    COMEX Division, with an anticipated third quarter launch.

    All NYMEX contracts traded on CME Globex will be cleared by the NYMEX
    clearinghouse. In addition to NYMEX liquidity providers, a specified
    number of CME market makers will be designated by CME to build
    electronic liquidity at NYMEX member rates. Additional terms of the
    agreement were not disclosed.

    "Outsourcing the electronic trading of our energy futures contracts to
    CME will ensure that we continue to meet the needs of our customers
    while providing additional liquidity to our open outcry trading
    platform," said Mitchell Steinhause, Chairman of NYMEX. "We have had a
    successful relationship with CME over the years, and we are pleased that
    we will be able to continue to work together to provide the most
    efficient and accessible energy futures exchange in the world."

    "CME is committed to bringing opportunities in energy trading to our
    customers around the globe," said CME Chairman Terry Duffy. "Our
    longstanding relationship with our colleagues at NYMEX and our previous
    experience in listing their contracts on our platform create a strong
    foundation for this agreement, which will greatly benefit market
    participants seeking access to the most liquid energy derivatives in the
    marketplace. By increasing global distribution of NYMEX products via
    CME Globex, the world's leading derivatives trading platform, we will
    deliver added value to our customers and shareholders."

    "This agreement establishes the most robust and liquid energy trading
    model in the world," said James E. Newsome, President and Chief
    Executive Officer of NYMEX. "Listing our energy contracts on the CME
    Globex platform enables us to dramatically increase our distribution
    much more quickly than we could have by building our own capability.
    This agreement will complement and enhance our open outcry trading,
    expand the accessibility of our benchmark energy contracts to investors
    worldwide and allow us to build on the record electronic trading volumes
    we have been experiencing."

    "Providing third-party technology services is a key element of CME's
    long-term growth strategy," said CME Chief Executive Officer Craig
    Donohue. "This service agreement will leverage CME's proven electronic
    trading platform and global distribution network to expand access to
    NYMEX, the largest and most liquid energy market in the world. The
    addition of energy contracts on CME Globex further diversifies our
    product offerings, creating the first electronic platform offering
    global access to every major asset class - interest rate, stock index,
    foreign exchange, agricultural and now energy."
  8. ITS about time.......

    nymex had no other chioce, ICE was kicking its ass...especially now that they going to launch the RBOB contract april 17th...

    spoke to nymex yesterday, they havnt confirmed a date but its before the start of the 3Q.....

    i dont understand how they pay the nymex cheif so much, clearly many on this forum are worthy of job...!!! i never understood why it took the e-mini of the cme in the first place...
  9. This sounds like pretty good news. Now we will have all the NYMEX products on globex, pretty much best of all possible outcomes.

    I wonder how much volume the e-miNY's will keep after full-sized contracts go on globex? Why would anyone want to trade them, unless they are strickly a one lot player? This might be an interesting experiment for the CME to evaluate doing the same for the big S&P contract.

    I think the metals could also attract significant retail interest.
    #10     Apr 7, 2006