Valhalla, NY-based Optionable Inc. continued to feel the backlash Monday more than two weeks after the energy options broker's largest customer, Bank of Montreal (BMO), revealed a $400 million-plus trading loss (see Daily GPI, April 30). On Monday, Optionable, which has seen a 91% drop in share value since BMO's loss announcement April 27, reported that Kevin Cassidy, vice chairman, CEO and director of the company, resigned Saturday. That news was followed by the New York Mercantile Exchange (Nymex) resigning board representation.
BMO said it lost between C$350 million and C$450 million (US$313.70 million to US$403.33 million) in wrong-way trades in natural gas, specifically "out-of-the-money options." The bank warned investors in late April that more related losses could be coming, but that they would be "substantially lower" than the losses already announced.
On Monday, Optionable also issued a public statement on the current turmoil. The company said one of its clients recently incurred some losses that have become a subject of public discussion. On Monday afternoon, shares of Optionable were trading at 49 cents per share, significantly lower than the $7/share the stock was trading at prior to the BMO announcement.
"Gains and losses are both inevitable in trading energy derivatives," said Albert Helmig, who has taken over day-to-day management of the company as chairman. "We are never pleased when losses dominate for one of our clients, but we do not design or help to design their strategies, nor are we financial advisors. We provide brokerage and execution services for trades that we are instructed to make by our clients. We believe strongly that our brokerage and execution services are and have been rendered appropriately, professionally and correctly."
In discussing the change of leadership, Helmig said, "In my new and expanded role as executive chairman I am going to assess the situation and guide the company accordingly." Helmig has more than 30 years of commodity experience from Wall Street to commodity merchant, spanning both physical and financial instruments on a global basis. He is CEO of Gray House, a private consulting firm providing risk management, price models and industry best-practice services to clients such as exchanges, fund managers, financial institutions, producers, integrated energy companies, government agencies and ministries, think tanks and law firms.
Nymex was also distancing itself from Optionable on Monday. In April, Nymex parent company Nymex Holdings Inc. completed agreements with Optionable Inc. and its founding stockholders to acquire 19% of Optionable. As part of the deal, Nymex elected Benjamin Chesir, Nymex vice president of new product development, as a director to the Optionable board.
That arrangement changed Monday. "We are concerned about the recently announced developments at Optionable and are actively reviewing the situation," Nymex said. "In order to avoid potential conflicts of interest during our review, we are resigning Nymex board representation effective today."
Optionable provides natural gas and other energy derivatives trading and brokerage services. The company provides its services to brokerage firms, financial institutions, energy traders and hedge funds nationwide. In addition to the traditional voice brokerage business, Optionable developed an automated derivatives trading platform. OPEX is a real-time electronic trade matching and brokerage system designed to improve liquidity and transparency in the energy derivatives market.
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