The New York Mercantile Exchange is putting together a wholly-owned e-commerce venture, eNYMEX, that officials claim will become "the premier global exchange" for over-the-counter (OTC) forward trading of a wide range of standardized physical commodity contracts, starting with petroleum and electricity.
NYMEX officials expect to have the system up and running for OTC electronic trading in October. Eventually, eNYMEX will provide a single internet hook-up to both the OTC and the exchange futures markets by routing orders to terminals on the trading floor and through the NYMEX Access electronic trading system, a representative told OGJ Online.
Combining existing futures and options markets with eNYMEX's electronic OTC market provides an ideal fusion of e-commerce "clicks" with industry "bricks," said NYMEX Chairman Daniel Rappaport in a written statement.
"The global energy and metals community has expressed a strong need for an electronic OTC platform that provides an open, independent, and neutral marketplace for trading by all participants; price transparency; counter-party credit risk management; and the liquidity created by simple, standardized contracts," he said.
The idea is to introduce into electronic trading complete counter-party risk management through the exchange's established clearinghouse. The venture also will create net margining of positions in the exchange futures markets by calculating a consolidated clearing position. That will provide significant cashflow benefits to participants trading across markets and commodities, Rappaport said.
Exchange officials will pursue strategic partnerships through the venture to provide clearing services to external organizations and create a credit structure that will permit floor members to participate in OTC markets.
The range of OTC products to be offered will focus initially on swap contracts for oil, petroleum products, natural gas, and electricity, with some spot cash market products also offered in North America, officials said. Later, it will be expanded to precious and base metals and coal.
Other potential trading offerings include bandwidth, emissions, and weather in the form of heating and cooling days, one of the latest hedges against energy costs. Contracts also will likely be offered for some European and Asian locations.