chicagotribune.com >> Business
Merc, Nymex deal reported
By Susan Diesenhouse
Tribune staff reporter
Published April 1, 2006
As the Chicago Mercantile Exchange hammers out its new strategy for capturing a piece of the highly prized energy futures business, it might again turn to the New York Mercantile Exchange to play a leading role.
Last year, the two reportedly discussed various combinations that included the cash-laden Merc buying a 10 percent stake in Nymex or extending the agreement that allowed some of the New York exchange's energy products to be traded on the Merc's Globex electronic platform.
Last fall, the exchanges' 3-year-old accord was allowed to lapse, despite Nymex's clear need for a robust electronic trading platform. With its system wanting, Nymex's once-dominant position in energy products is being chipped away by the all-electronic IntercontinentalExchange Inc.
At the same time, the Merc has made plain its intention to enter the fast-growing energy sector and to use its approximately $950 million in cash to invest in complementary businesses.
Then Friday, Dow Jones Newswires reported a new agreement that would allow Nymex, for a price, to again start trading some energy products on Globex.
"We are in the middle of evaluating what our technology will be," said Richard Schaeffer, vice chairman of Nymex. "It's too sensitive to discuss further."
The Merc declined to comment.
While a technology deal makes sense, talks between the two exchanges also might be the harbinger of a broader partnership in the works.
"I think [the Merc] has something bigger in mind," said Jim Ritterbusch, an energy consultant in Galena, Ill. "They're licking their chops to get more involved in the energy complex."
Because breaking into an established market is always tough, the Merc might find it more economical to buy another energy futures business than build its own, said Stephen Platt, a senior energy analyst for Chicago-based Archer Financial Services Inc.
The Merc wants to buy into an exchange that is expert in energy futures, while Nymex needs better technology to "withstand the fierce onslaught from ICE," Ritterbusch said.
A more distant threat is posed by the Chicago Board of Trade, which also has announced its intention to enter the energy arena.
From 2002 through 2005, Nymex traded its mini crude oil and natural gas contracts on Globex.
"Now it would probably trade the whole spectrum: crude oil, unleaded gasoline, heating oil and natural gas," Ritterbusch said.
As Nymex fends off competition from ICE, a strong push from the Merc into energy could be draining. Therefore, "now they're talking about cooperation," Boland said.
"A Nymex/CME combination would be a formidable competitor," said ICE spokeswoman Kelly Loeffler. |
