The International Petroleum Exchange (IPE), based in London,accepted an offer from NYMEX last week to look into a possiblemerger, which would create a “single global energy exchange.” Anagreement to join the exchanges would affect companies which sellcommodities internationally in both markets. The domestic gasmarkets in both countries, however, would see little impact.

The board of directors for each organization agreed to create ajoint working group to investigate the options. Although thepossibility of a merger is being explored, the preliminary natureof the situation was stressed. “Before you can talk about otherhurdles, I think the biggest hurdle will be to determine the scopeof the deal, if there is any,” said Nachamah Jacobovits, a NYMEXspokesperson.

Jacobovits added that oil companies stand to benefit from anagreement because they are more likely to do business in bothexchanges. If these exchanges merge into a single entity, companieswill be able to deal with both markets at once, creating greaterefficiency.

This agreement marks IPE’s acceptance of an offer NYMEX made sixmonths ago. Earlier this year, both exchanges embarked on a jointventure to develop an after-hours electronic trading platform. “Theconcept of a single global energy exchange with operations in NewYork and London,” the company said, “emerged during the course ofthese discussions.”

The creation of this working group is the first joint move bythe two organizations on behalf of that concept. It is composed ofsix representatives from IPE and four members of NYMEX’s executivecommittee. The group’s duties include discussing the feasibility ofmerger possibilities with regulatory commissions for bothcountries, defining the structure of the merger, then reportingtheir findings to the boards of both exchanges. So far, the UK’sregulatory agency, the Financial Service Authority, has beencontacted by the group. Results of the discussion were notdisclosed. A meeting with the U.S. Commodity Futures TradingCommission (CFTC), has been scheduled for early December. Theexchanges have set no timetable for the group’s progress.

“I’m interested to see what will happen after the jointcommittee makes their report,” said Seana Lanigan, spokeswoman forIPE, whose membership is made up of about 40 floor members, “If theboard decides that the changes in the report are for the better,they’ll put a vote before the membership. Seventy-five percent ofour membership will have to agree on the changes before they’reimplemented.”

Sources from NYMEX also said that a membership vote is possible,but not required. The scope of the proposal will determine the’s course of action.

John Norris

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