One of America’s great, low-tech traditions - open-outcry trading, along with a slew of jobs, are heading for the door as the CME Group edges closer to its proposed takeover of Nymex, reports the FT on Tuesday.
If the CME’s takeover talks with Nymex come to fruition, it would lead to job losses from the boardroom to the trading floor, with up to half the trading pits at the energy exchange likely to be closed within two years, notes the FT.
While the CME will probably retain pits to trade options – a more complex areas of derivatives trading and hence more difficult to put on electronic platforms – the rest of the 136-year-old trading floor at the New York exchange could be closed within two years, say people familiar with CME thinking.
Sad, but inevitable, says the FT in a separate report on the aftermath of last month’s vote by the New York Board of Trade to close most of its trading floor. In that vote, the Nybot “not only lost a 137-year-old financial institution with the drama of loud, open-outcry trading and its mysterious hand-signals”.
The decision, which followed the Nybot’s purchase last year by the all-electronic InterContinental Exchange, also spelt the end for a piece of Americana that provided the backdrop for the 1983 Eddie Murphy film Trading Places, the report notes.
Electronic trading already makes up 80 per cent of trading on Nymex. The number of futures pit traders left at the exchange has dwindled and is thought to be less than 100, down from about 400 nearly two years ago when Nymex went electronic. The exchange on Monday said it would disclose official headcount figures later this month.
The CME – formed from the Chicago Mercantile Exchange’s takeover of the Chicago Board of Trade last year – announced last week it was in exclusive 30-day talks to buy the New York energy exchange. The proposed cash-and-shares deal would create the world’s largest exchange, with an equity value of about $45bn, and control about 98 per cent of the listed futures sector in the US.
The CME has said it will maintain a trading floor in the New York area, but many suspect it will sell the Nymex headquarters in the World Financial Center in downtown Manhattan and move the exchange – possibly to its disaster recovery site in Long Island.
Because many of those on the Nymex floor are independent traders, they might well choose to leave the floor voluntarily rather than cling on after the takeover.
But for those Nymex floor traders who still hope that the CME will keep open outcry going, last week brought a glimmer of hope. The CME relented on plans to close its pork-belly pit as part of its merger with the CBOT, adds the FT.
A CME official said the exchange had now found a place to accommodate the half-a-dozen traders who still trade the commodity in the traditional way.
