Nymex members and shareholders today voted 79% in favor of an acquisition of the exchange by the CME Group; a minimum of 75% approval was required. CME Group members and shareholders also approved the deal, which is scheduled to close on Friday Aug. 22.
“Today is the culmination of many months of hard work on behalf of the boards of Nymex and the CME and the management teams,” said Nymex President and CEO Jim Newsome, during a conference call following the announcement. “There was tremendous value created in today’s vote. It is a great day for the derivatives business.”
In addition to giving CME Group control over the lucrative energy and metals futures markets, which the CME Group has hosted on its Globex electronic trading system, CME Group will acquire Nymex’s Clearport trading and clearing system. The addition of Clearport is expected to enhance CME’s ability to enter the OTC space.
“Clearport is a model that has worked well for us,” Newsome said. “There is no reason why that type of business model wouldn’t work with a more diversified asset class such as [what the CME offers].”
CME Group CEO Craig Donohue said, “We are already in the process of seeking regulatory approval to begin clearing agricultural commodity swaps. There are many parallels between what has worked very successfully with Clearport in the energy swaps area and what we are looking to do in the agricultural commodity swaps area, which is a rapidly growing area.”
Nymex Class A members will receive $750,000 to extinguish certain membership rights, including revenue sharing as described in Section 311(G) of the NYMEX bylaws. However, they retain the right to use or lease their memberships for NYMEX open outcry and electronic trading purposes. The number of Class A memberships is now limited to 816, and while trading of Nymex seats was suspended today, the seat market will be preserved. The Nymex trading floor will remain open until Dec. 31, 2012. If the occupancy agreement is terminated, a trading floor will be maintained elsewhere in New York City for as long as profitable.
CME expects the deal to be Financially Attractive within 12 to 18 months after the close, and to produce a pre-tax cost savings of $60 million annually, driven primarily by technology and administrative cost reductions.
Customer benefits derived from the deal include clearing efficiencies, harmonized trading and administrative technology systems. Strategically, it affords CME Group the opportunity to provide a regulated, transparent exchange for global energy and metals markets.
