Futures industry big shots who are negotiating common trade-clearing in Chicago might be tempting fate by excluding the New York Mercantile Exchange.
The last time they barred the No. 3 U.S. exchange from a key joint initiative, the results were dire: Jilting Nymex delayed the launch of trading on the Globex electronic system, and inspired the New Yorkers to launch a competing system. The Globex partnership between the Chicago Mercantile Exchange and the Chicago Board of Trade broke up acrimoniously several years ago, never fulfilling its promise.
So is common clearing a case of Globex revisited? “To a certain extent, I think that’s accurate,” said Nymex President R. Patrick Thompson. “We trade 80 percent of the futures in New York. We should have been at the table throughout this.”
Instead, the Chicago exchanges, in effect, have negotiated on Thompson’s behalf. They’ve agreed, for instance, to use the Clearing 21 software system if it passes muster with consultants, seeming to forget that Nymex is its part-owner, with the Chicago Merc.
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They’ve even debated the New York exchange’s board representation if it chooses to join common clearing later. Nymex would get one seat, not the three that would make it an equal partner with the Merc and Board of Trade.
Would Nymex join under those governance terms? “There may be a need for further negotiations,” Thompson warned.
Still, the Chicagoans mutter that Nymex just isn’t big enough to justify any more attention than they’re giving it. Anyway, they figure, the same industry pressures pushing together the Merc and Board of Trade will herd Nymex into the clearing fold.
Yet the New York exchange has other prospects. Last week it agreed to develop an electronic trading system for energy contracts with London’s International Petroleum Exchange.
If the Chicago exchanges aren’t careful, the New Yorkers could opt for High Tea instead of waiting around for a leftover slice of deep-dish pizza.
Time out: While acknowledging that opportunity dictates the pace of trading-firm acquisitions, Chicago’s Carr Futures is temporarily pulling in its horns. “Today, we are not looking. Later on, we will consider things,” said Didier Varlet, chairman of the firm.
Varlet has engineered two big mergers over the last year, nearly tripling his head count by incorporating futures operations of Dean Witter and Credit Agricole. Now, he’s content to digest: “We think we can gain market share from this base.”
Administration and back-office operations already have been merged, and Carr’s computer systems will take over completely for Dean Witter’s at the end of the month, Varlet said. By design, sales forces have remained separate. “The key point is to have all these guys happy,” he said.
With Varlet on the sidelines, that leaves Jack Wing of ABN AMRO Chicago Corp. as the biggest remaining player on the prowl.
New Board of Trade: Two small New York futures exchanges on Monday announced an agreement in principle to merge.
Under the deal, the Coffee, Sugar & Cocoa Exchange and New York Cotton Exchange would be combined into a new holding company called the New York Board of Trade. The deal is subject to two-thirds majority votes by the members of each exchange.
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