As more trading volume swings to the electronic marketplace, Nymex Holdings, parent company of the more than 130 year-old physical energy and metals trading New York Mercantile Exchange (Nymex), is allegedly in talks with potential suitors to sell itself.
"We have no comment on the reports," said Anu Ahluwalia, Nymex spokeswoman. "We don't comment on market rumor or speculation."
According to a Bloomberg report, Nymex has held talks to sell itself to NYSE Euronext, Deutsche Boerse or the Chicago Mercantile Exchange (CME). Some market watchers familiar with the situation said the news of Nymex putting itself on the block really comes as no surprise.
"This has been a long time coming," said a New York broker. "The rumor is that the New York Stock Exchange is going to bid over $14 billion for Nymex. It really is not a surprise; we've heard for a while that NYSE has been interested in expanding into the commodity arena. From my perspective, I thought CME would be the major suitor once it finished buying the Chicago Board of Trade. Nymex is already in bed with CME on Globex, so CME would make sense."
As of Friday afternoon, Nymex's market capitalization stood at $13.1 billion.
The broker traced Nymex sale talk all the way back to the company's initial public offering (IPO) in Nov. 2006 (see Daily GPI, Nov. 20, 2006). "I think this whole Nymex IPO last year was the set-up for a sale. They wanted to maximize their value in order to make a killing by being bought," he added.
Another reason for selling could be the fact that Nymex does not have an in-house electronic trading platform, during a time when the switch to online transactions from traditional floor trading resembles more of an exodus than a migration, the broker said.
"The NYSE has a top-of-the-line electronic trade platform, as does CME. Nymex's deal with CME on Globex was a little bit of a change in Nymex's normal operations. Part of the reason Nymex got behind the eight ball on this whole electronic trading scenario is because Nymex always seems to want to develop their own proprietary technology. When they entered the Globex deal I think that signaled a realization within Nymex that they can't always build everything themselves. They were too far behind to try to roll out their own platform."
A Northeast oil and gas analyst added that while a sale would make perfect sense, Nymex could have been looking at a different outcome "if it had played its cards right." The analyst noted that shortly before Nymex rival IntercontinentalExchange (ICE) really started to develop, there were several factions at Nymex who wanted to move the exchange electronic.
"Unfortunately the members were too short-sighted to see where things were headed. They were more concerned with preserving their spot on the floor, so to speak," the analyst said. "If they had been a little more long-sighted than they were, there would be no such thing as ICE right now. They could have cut ICE off at the knees before they got entrenched with the natural gas contract, which is what really got ICE going.
"There were so many people unhappy with the way trading was going on the floor in natural gas, when ICE came along with a natural gas contract, it took Nymex way too long to come up with something to compete," he added. "The Nymex membership had blinders on in attempting to preserve open outcry. While each Nymex seat member made in excess of $12 million a seat from the company's IPO, Nymex members could have been sitting even prettier if they had cut ICE off."
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