New York Mercantile Exchange

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The New York Mercantile Exchange (NYMEX) is the world's largest physical commodity futures exchange located in New York City. Its two principal divisions are the New York Mercantile Exchange and the New York Commodities Exchange (COMEX) which were once independent companies but are now merged. The New York Mercantile Exchange, Inc. is a large private company.

The New York Mercantile Exchange handles billions of dollars worth of energy products, metals, and other commodities being bought and sold on the trading floor and the overnight electronic trading computer systems. The prices quoted for transactions on the exchange are the basis for prices that people pay for throughout the World.

The floor of the NYMEX is regulated by the Commodity Futures Trading Commission, an independent agency of the United States Government. Each individual company that trades on the exchange must send their own independent brokers. Therefore, a few employees on the floor of the exchange represent a big corporation and the exchange employees only record the transactions and have nothing to do with the actual trade.

On February 26, 2003, The New York Board of Trade (NYBOT) signed a lease agreement with the NYMEX to move into its World Financial Center headquarters and trading facility after the NYBOT's original headquarters and trading floor was destroyed in the September 11, 2001 Terrorist Attacks on the World Trade Center. [1]

After the terrorist attacks, the NYMEX has built a $12 million trading floor backup facility outside of NYC with 700 trader's booth, 2,000 telephones, and a backup computer system. This backup is in case of another terrorist attack on Lower Manhattan or a natural disaster. [2]

1 History of the exchange
2 Location
3 Commodities traded on the exchange
4 See also
5 External links

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History of the exchange

Commodity exchanges began in the middle of the 19th century, when businessmen began organizing market forums to make buying and selling of commodities easier. These marketplaces provided a place for buyers and sellers to set the quality, standards, and establish rules of business. By the late 1800s about 1600 marketplaces had sprung up at ports and railroad stations. In 1872, a group of Manhattan dairy merchants got together and created the Butter and Cheese Exchange of New York. Soon, egg trade became part of the business conducted on the exchange and the name was modified to the Butter, Cheese, and Egg Exchange. In 1882, the name finally changed to the New York Mercantile Exchange when opening trade to dried fruits, canned goods, and poultry. As centralized warehouses were built into principal market centers such as New York and Chicago in the early 20th century, exchanges in smaller cities began to disappear giving more business to the exchanges such as the NYMEX in bigger cities. In 1933, the COMEX was established through the merger of four smaller exchanges; the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. On August 3, 1994, the NYMEX and COMEX finally merged under the NYMEX. Now, the NYMEX operates in a state of the art trading facility and office building with two trading floors in the World Financial Center in downtown Manhattan.

The NYMEX contracts will be listed on Globex, which operates almost 24 hours a day, for an initial 10 years. NYMEX contracts traded on CME Globex will still be cleared by NYMEX's clearinghouse.

The exchanges did not disclose the fee schedules involved, but CME chief executive Craig Donohue told reporters the NYMEX products traded on Globex were likely to generate an average rate per contract of about 35 cents to 50 cents.

He later told analysts the initial capital and operating costs associated with the deal have already been reflected in CME's previous estimates on 2006 spending.

CME, which had working capital of $953 million at the end of 2005, remains "well positioned for consolidation" in the derivatives industry and focused on merger and acquisition opportunities that will provide demonstrable benefits to shareholders, Donohue said.

NYMEX's president James Newsome, meanwhile, said the company was in an "enviable position to look at and evaluate a number of potential actions that we believe can create shareholder value".

Ahead of its possible IPO, the exchange recently sold a 10 percent stake to private equity player General Atlantic for $160 million. GA will invest an extra $10 million if NYMEX undertakes conditions such as completing an IPO at or above $2 billion by the end of 2006.

CONCERNS OVER FLOOR'S FUTURE

But there were concerns from some traders about whether the Globex deal is a big step toward ending open outcry trading at NYMEX, just as ICE did after taking over the International Petroleum Exchange in London.

"It's the tide of history," said Mike Fitzpatrick, vice president for energy risk management at Fimat USA in New York. "That's the way it's going and no one is going to be able to prevent it."

Newsome told reporters he was confident the increased distribution would actually enhance floor trading by increasing overall market liquidity.

"What happens to floor trading is a question for the market to decide," said Daniel Dicker, a NYMEX member for 24 years who is running for director at the exchange. "The reality of today's market space does not allow anyone the luxury to ignore the electronic venue."

Dicker said that Thursday's deal was the "quickest route to market electronically that NYMEX could possibly find."

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Location

The official address of the NYMEX headquarters and trading facility is One North End Avenue, New York, NY 10282-1101. The company has additional offices in Houston, Washington D.C., London, and Hong Kong.

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