NYMEX's London move????

http://go.reuters.co.uk/newsArticle...89844&section=finance&src=rss/uk/featuresNews


"LONDON (Reuters) - Volumes of all-electronic London Brent crude futures trade have hit record levels, while the rival open outcry pit in Dublin has languished in a summer lull.

Undaunted, bosses at the New York Mercantile Exchange's European unit say their resolve to bring their Brent pit to London is unchanged."


Am I missing something here, or has the leadership at the NYMEX completely lost touch with reality?

I know that the IPE is technologically challenged, but does NYMEX really think they can turn back the clock on the past 20 years of progress in trading technology?

I guess that the NYMEX membership must be making these decisions, because they seem to have the same mentality as the bone-headed memberships at the CME and CBOT, who successfully stymied progress at those two exchanges for a decade.

 

Just wait until Interactive Brokers add the IPE Brent crude options.

 

Does anyone out there trade the IPE direct using TT? If so, through what clearing firm? I've heard that the exchange is not very stable, but volume keeps growing. I think most people are starved for an efficient electronic way to trade energy products so as to not have to deal with the thieves in the NYMEX pits.

 

and then what?

no change.

ib customers in their totality are just a pimple on the butt of markets.

if ib went out of existence tomorrow, their customer volumes would not be missed i tell you.

 

there will always be money in having a pit open for necessary markets like oil, so it does make business sense.

computers break down, and the personal touch a pit offers is often the place to go for big orders.

in general though, yes, the screen is the way forward (obviously). look at the pit as a necessary, but largely redundant 2nd market.

(& look at nymex as a redundent and unecessaryly expensive & unreliable exchange - if ipe got their act together, they could roll all over these nymex tossers)

 

I would argue that cheaper, better redundancy can be offered by multiple electronic systems. Having multiple backups in several locations can also allow an exchange to avoid a shut-down caused by some catastrophe at one location.

Having several years of floor experience, I can assure you that the only 'personal touch' offered by a floor broker on your order is in the couple ticks he gives away to his buddy the local standing in front of him.

As for IPE taking out NYMEX (if they got there act together), I totally agree. NYMEX is infamous for their thievery and overall inefficiency. If any electronic exchange with some clout were to really go after them, I think they could blow them away.

 

I justed started trading e-miNYs off a screen here at the NYMEX last week. Whenever I tell a local what I'm doing, he always readily agrees that trading from the screen is the way to go and discourages me from trying to learn the floor.

Obviously I haven't spoken to every local or even a majority of them, but my impression thus far is that they're not the ones pushing the continuation of open outcry. (Of course, maybe they see the writing on the wall but want to milk it for all its worth before retiring.)

I think that there are just too many customers in the energy business that like talking to someone on the phone. You'll have to wait until they die or retire before it completely rolls over.

 

i feel humbled to be surrounded by so many experts.

 

I agree, for futures (and short dated CL and NG vanilla options) the business will eventually move to the screen but I would be very surprised to see long dated and/or complex NG and CL options as well as any HU and HO options beyond the front two months, on a screen. I think that there's a decent chance that you see the futures liquidity move to a screen and the options liquidity (assuming they can be cleared) move to the OTC voice broker maket.

Having said that, commericials will be the "decision makers" when it comes to the business moving to the screen. If the commercials don't migrate to the screen, neither will the specs.

IMO, the NYMEX pits will be around for much longer than many anticipate. Several years ago everyone thought that the OTC volume would move to screens and everyone who could build a screen (Enron Online, Dynegy Direct, Coral Connect, Tradespark, Houston Street, etc) but as soon as the bubble burst, most OTC volume moved back to voice brokers. In 1999-2001 there were a couple dozen screen based markets available but ICE is the ONLY one still alive, save a few product specific platforms i.e. Charkboard.

In addition, OTC clearing is significantly increasing OTC business, including NYMEX look-a-likes...We've always done a lot of OTC volume but we're doing a lot more OTC and a lot less NYMEX now that we can clear many of our trades.

IMHO, 10 years from now NYMEX will most likely be more of a clearinghouse than a pit traded exchange. In addition, I think you'll see several screen based applications fighting for the trading volume while the trades are cleared through NYMEX.

The question is, who can build a solid platform that also provides effortless clearing via NYMEX, LCH, etc? IPE/ICE can't do it, they've tried (and been the dominant organizations in this space) and have failed. And if you've ever traded on Access or Clearport you know that NYMEX isn't the answer.



In other news...

Nymex nears approval from London authorties Nymex nears approval from London authorties

By Kevin Morrison
Published: July 20 2005 21:10 | Last updated: July 20 2005 21:10


The New York Mercantile Exchange said it is at an “advanced stage” in its application to obtain regulatory approval from the Financial Services Authority to set up an open outcry oil futures exchange in London.

However, Samuel Gaer, chief executive officer of Nymex Europe, said he could not provide a start-up date for Nymex in London. Nymex applied to the FSA in April, and industry officials expect the world’s largest energy futures exchange to start trading in the UK capital by the summer’s end.

If approval is obtained, Nymex intends to transfer its Brent futures trading business from Dublin, where it set up a trading floor last November to take on the International Petroleum Exchange, the dominant custodian of the Brent crude future contract.

Mr Gaer remained upbeat about Nymex’s success in London despite Dublin attracting a small proportion of the daily trading volumes in Brent. Oil traders have also embraced electronic trading with volumes in the IPE Brent contract rising since the exchange closed its trading pits in April.

“We are doing what our customers want. This is not about open outcry versus electronic, it is about what the customer wants,” said Mr Gaer.

He said between 20 and 30 traders were working on its Dublin floor, which has generated volumes of more than 5,000 a day on average in its Brent contract so far this year, or less than 5 per cent of the rival Brent contract on the IPE.

However, the move to electronic trading has not been seamless. Last Thursday, the IPE delayed settlement in its Brent and gasoil contracts after the suspension of trade, costing some traders money.

A lot is riding on Nymex’s success in London, as it is seen as a litmus test for its international expansion plans in Dubai and Tokyo, and possibly China.

 

NYMEX selects OMX technology for London open outcry futures exchange

Published: 17/08/2005

The New York Mercantile Exchange has signed a five year contract with Swedish technology group OMX for the supply of IT infrastructure services at the outcry oil futures exchange it plans to open in London later this year. Nymex is the largest physical commodities exchange in the world, and trades futures on metals as well as crude oil and oil products. The exchange plans to move the open outcry trading floor for Brent crude oil futures it opened in Dublin last year to London as soon as it receives regulatory approval. OMX says it will host Nymex's European IT infrastructure as well provide desktop and network support on the trading floor.

Commenting on the contract, Samuel Gaer, CEO of Nymex Europe, says: "We chose to work with OMX to take advantage of their broad experience as an IT provider of mission critical systems for the financial services industry and to enable us to be up and running quickly." The latest agreement with OM which follows an earlier decision by Nymex Europe to lease space in the vendor's London office.

London's International Petroleum Exchange (IPE) switched to an all-electronic operation in April this year after shutting down it's remaining trading pit. Many of the 100+ traders that lost their jobs were expected to move to the Nymex outcry trading operations.

© Finextra.com