New York Mercantile Exchange Inc. (Nymex) parent Nymex Holdings Inc. has made an alliance agreement with LCH.Clearnet Ltd. to introduce a broad range of global energy products, which the companies hope will deliver improved capital and operational efficiencies through wider execution capabilities, broader credit intermediation and margining benefits for customers and market participants.
Under the terms of the agreement, Nymex will offer "a new and distinct slate" of over the counter (OTC) and futures products for clearing through LCH.Clearnet. The initial slate will encompass the global benchmark oil contracts, including WTI, Brent and Gasoil, as well as key natural gas and electricity contracts. Nymex said the contracts are expected to begin trading and clearing in mid-2008, pending regulatory approval.
The contracts will be listed for trading on the CME Globex electronic trading system and on Nymex ClearPort for submission for clearing. Nymex said the contracts will be cleared by LCH.Clearnet using existing and widely distributed clearing technology, thus optimizing operational efficiencies for market participants.
"The worldwide distribution of Nymex's trading and depth of markets, combined with the LCH.Clearnet clearing and regulatory structure, is a winning combination for market participants," said Nymex Chairman Richard Schaeffer. "The benefits to clearing firms, commercial users and market makers will be significant, including margin and other capital efficiencies, access to established global markets, an increased product slate and the ability to transact business virtually 24 hours a day."
LCH.Clearnet serves international exchanges and platforms, equity, exchange-traded derivatives, energy, interbank interest rate swaps markets and the majority of the Euro-denominated and sterling bond and repo markets. The company is currently owned 67.6% by users, 17.8% by exchanges with the balance of 14.6% being held by Euroclear. Upon completion of the Euronext share buyback program by 2009, the group will be owned 73.3% by users, 10.9% by exchanges and 15.8% by Euroclear.
"This is a clear example of the advantages that can be enjoyed through the services of an independent, appropriately regulated clearinghouse to deliver service in both Europe and the U.S.," said LCH.Clearnet CEO Roger Liddell. "With its well proven risk management capabilities and a diversified multi-asset class default fund structure, LCH.Clearnet is ideally positioned to join forces with the world's largest energy exchange."
More information on the alliance is available at www.nymexonlchclearnet.com/.
Nymex, which offers futures and options trading in energy, metals and soft commodities contracts and clearing services for more than 350 off-exchange energy and metals contracts, is still engaged in talks to be acquired by the Chicago Mercantile Exchange (CME) (see NGI, Feb. 4). After the initial 30-day negotiating period expired in late February the companies mutually agreed to extend talks about the possible acquisition until March 15 (see NGI, March 3).
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