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Electronic Takeover: CME to Shutter Futures Floor Trading This Summer

Nine years after the New York Mercantile Exchange (Nymex) inked an agreement with CME Group's Chicago Mercantile Exchange to offer side-by-side trading of its products on the open outcry floor and on CME's Globex electronic exchange, CME Group, which ended up acquiring Nymex in 2008, said late Tuesday it will close most of its floor futures trading pits -- including natural gas -- in Chicago and New York by July 2.

Citing the fact that open outcry futures trading has now fallen to just 1% of the company's total futures volume, CME Group said the time has come.

“We have always been committed to maintaining an efficient marketplace for our global customer base, CME Group spokesperson Chris Grams told NGI on Wednesday. "And unlike our competitors, we have provided a choice of venue by supporting open outcry trading for many years, allowing market participants to adapt as volume shifted to the screen.

"However, open outcry futures volume has decreased by 75% since 2008, and now accounts for just 1% of our overall futures volume," he added. "On the options side, we still see active trading on both the floor and the screen, and we will continue to keep those open outcry markets open as long as our customer base continues to show a viable preference for using both venues.”

The floor-based S&P 500 futures market, which CME Group said "continues to provide an important venue for trading the underlying futures contract for the open outcry S&P 500 options on futures contract," will remain open on the Chicago trading floor.

With the exception of the S&P 500 futures and options on futures pits which will remain open, equity index futures pits and the DJIA ($10) and NASDAQ-100 options pits will close following the expiration of the June 2015 contract on June 19. All other futures pits will close on July 2.  In addition, in Chicago, all options pits will be located on a single floor in the company's Financial Room by September.

To assist floor traders with the transition going forward, CME Group said it will make every attempt to make booth space available to those who want to trade electronically following the closure of the open outcry futures pits. The company will hold members' meetings in Chicago and New York to answer questions and discuss transition plans.

Likely responding to the success of the Intercontinental Exchange's (ICE) electronic trading activity, the Nymex board of directors in February 2006 voted to offer side-by-side open outcry and electronic trading of its benchmark, physically settled energy futures contracts (see Daily GPI, Feb. 9, 2006). In April of that year, Nymex announced that it had solved the dilemma of how to take its electronic energy trading to a round-the-clock schedule through a technology services agreement with the Chicago Mercantile Exchange (CME), under which CME became the exclusive electronic trading services provider for Nymex's energy futures and options contracts (see Daily GPI, April 7, 2006).

Side-by-side trading went live on Globex in June 2006 (see Daily GPI, June 26, 2006), and CME group went on to acquire Nymex in March 2008 for $9.5 billion (see Daily GPI, March 18, 2008).

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