Nymex in talks to extend link with CME
By Jeremy Grant in Washington and Kevin Morrison in London
Published: August 19 2005
The New York Mercantile Exchange is in talks with the Chicago Mercantile Exchange about extending its use of the CME's electronic trading system for two key energy futures contracts for the next five years, futures industry participants and exchange members said. The development is a sign that Nymex might be keen to head off any attempt by the CME to compete against Nymex in energy futures an area in which the Chicago exchange has recently expressed interest. It is also a sign of the manoeuvring under way among US exchanges as they assess how to take advantage of consolidation and the prospect of increased domestic competition. Under the arrangement being discussed, Nymex would pay the CME an annual fee of $5m-$6m to continue using Globex, the CME's system. The CME would agree to a "non-compete clause" preventing it from launching rival crude oil and natural gas futures. Under an arrangement in place since 2002, Nymex has been using Globex for electronic trading of its "miNY" crude oil and natural gas futures contracts. It had been due to shift the contracts to its Clearport electronic trading system earlier this year but twice postponed that move. On Wednesday, Nymex said it had postponed the migration for a third time.
James Newsome, Nymex president, said that "as the exchange continues to study its strategic alternatives, which includes a review of existing technology initiatives, it has determined that the appropriate course of action at this time is to maintain existing technology arrangements". One Nymex shareholder said of the plan under discussion: "They [Nymex members] want Nymex to pay the Merc $5m-$6m a year to keep them out of the oil business." Some industry observers questioned why the CME would agree to such a non-compete arrangement in energy futures. But the arrangement would not prevent the CME eventually making a bid for Nymex, which is undergoing a strategic review by its board.
John Barun, president of Capital Markets Consulting, said: "For them [the CME] effectively to be an incubator to help the Nymex go electronic and then to pounce is a legitimate play they might want to make." Anu Ahluwalia, a Nymex spokeswoman, said: "We're not commenting on any deals until they are complete." The CME said it did not "comment on speculation".
© FT.com
By Jeremy Grant in Washington and Kevin Morrison in London
Published: August 19 2005
The New York Mercantile Exchange is in talks with the Chicago Mercantile Exchange about extending its use of the CME's electronic trading system for two key energy futures contracts for the next five years, futures industry participants and exchange members said. The development is a sign that Nymex might be keen to head off any attempt by the CME to compete against Nymex in energy futures an area in which the Chicago exchange has recently expressed interest. It is also a sign of the manoeuvring under way among US exchanges as they assess how to take advantage of consolidation and the prospect of increased domestic competition. Under the arrangement being discussed, Nymex would pay the CME an annual fee of $5m-$6m to continue using Globex, the CME's system. The CME would agree to a "non-compete clause" preventing it from launching rival crude oil and natural gas futures. Under an arrangement in place since 2002, Nymex has been using Globex for electronic trading of its "miNY" crude oil and natural gas futures contracts. It had been due to shift the contracts to its Clearport electronic trading system earlier this year but twice postponed that move. On Wednesday, Nymex said it had postponed the migration for a third time.
James Newsome, Nymex president, said that "as the exchange continues to study its strategic alternatives, which includes a review of existing technology initiatives, it has determined that the appropriate course of action at this time is to maintain existing technology arrangements". One Nymex shareholder said of the plan under discussion: "They [Nymex members] want Nymex to pay the Merc $5m-$6m a year to keep them out of the oil business." Some industry observers questioned why the CME would agree to such a non-compete arrangement in energy futures. But the arrangement would not prevent the CME eventually making a bid for Nymex, which is undergoing a strategic review by its board.
John Barun, president of Capital Markets Consulting, said: "For them [the CME] effectively to be an incubator to help the Nymex go electronic and then to pounce is a legitimate play they might want to make." Anu Ahluwalia, a Nymex spokeswoman, said: "We're not commenting on any deals until they are complete." The CME said it did not "comment on speculation".
© FT.com