Heated commodity exchange competition appears to be paying off for New York-based Nymex Holdings Inc. and Atlanta-based IntercontinentalExchange (ICE), as the arch rivals both reported record earnings and results for the third quarter of 2006.

Nymex Holdings Inc., which operates the New York Mercantile Exchange, reported record net revenues, net income, and volume for the third quarter, while ICE, which operates a global electronic marketplace for trading both futures and over-the-counter (OTC) energy contracts, reported its third consecutive quarter of record results in revenue, net income and operating margin driven by record trading volume for the third quarter.

The energy trading landscape continues to evolve as both exchanges vie for market share in a hotly contested race (see NGI, Feb. 20; May 15). In April, Nymex inked an electronic trading agreement with the Chicago Mercantile Exchange in order to stay competitive with ICE’s online trading platform (see NGI, April 10). ICE countered in September by announcing it had agreed to acquire the New York Board of Trade (NYBOT), which will give it a critically needed clearing operation, NYBOT subsidiary New York Clearing Corp. Through the NYBOT deal, ICE also will be able to offer the 136-year-old floor-based exchange an electronic trading platform (see NGI, Sept. 18).

For the three months ended Sept. 30, Nymex posted net income of $40.7 million, an 81.7% increase over the $22.4 million the company recorded in the prior year’s quarter. Nymex’s net revenues were $142.4 million, an increase of 45.5% compared to $97.9 million during 3Q2005. Nymex noted that 3Q2006 included one-time, pre-tax charges of approximately $6 million resulting from the closure of its London location that housed its trading floor and from a reduction in its employee headcount under a “reduction in force” initiative. The exchange reported that daily average contracts traded rose to 1,323,527 in the third quarter of 2006, a 41.6% increase over the 934,472 daily average contracts traded during the same period in 2005.

In July, Nymex filed with the Securities and Exchange Commission (SEC) to offer an initial public offering (IPO) of its common stock (see NGI, July 24). Under the planned IPO, Nymex seeks to raise up to $250 million and intends to list its stock on the New York Stock Exchange under the symbol “NMX.” The company is still in the midst of a “quiet period” as a result of the IPO filing.

ICE reported consolidated net income in 3Q2006 of $43.6 million, an increase of 159.5% compared to net income of $16.8 million for 3Q2005. Diluted earnings per share were $0.73 in the third quarter of 2006, which was based on 59.6 million diluted weighted average common shares outstanding. ICE posted consolidated revenues of $94.7 million, a 109.2% increase compared to the third quarter of 2005. Consolidated operating income rose to $65.4 million, a 163.0% increase compared to the third quarter of 2005, and produced an operating margin of 69.1%.

Average daily volume for ICE Futures, the company’s futures business segment, in the third quarter of 2006 increased 125.1% to 412,993 contracts, compared to 183,481 contracts a day during 3Q2005. Average daily commissions for ICE’s over-the-counter (OTC) segment for the third quarter of 2006 increased 95.3% to $737,967 compared to $377,815 per day in the third quarter of 2005. Average daily commissions reflect daily trading activity in the company’s OTC markets.

“These record results demonstrate ICE’s continued leadership in the electronic energy markets across futures and OTC segments,” said ICE CEO Jeffrey C. Sprecher. “Market participants are increasingly relying on our global energy markets for their hedging and risk management needs. We continue to expand our products and technology platform to meet the demand for access to our liquid and transparent markets.”

Sprecher added that ICE continues to move forward with its September acquisition agreement with NYBOT. “We are pleased with the progress on the acquisition to date, and we believe that the merger between ICE and NYBOT will create a winning combination for customers and stakeholders,” he said.

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