Business Online – THE New York Mercantile Exchange spied an opportunity when the Intercontinental Exchange (ICE.XX) closed its London trading floor in early 2005 and moved energy contract trading to computer terminals.
Inspired by disgruntled ICE traders, famed for their colourful jackets, Nymex opened its own floor with a blitz of advertising, calling itself the “champion of open outcry†and rolling out the red carpet for traders on opening day.
But Nymex’s bid to snatch business from ICE was undermined by a phenomenon that was driving the switch to electronic from open outcry trading: the arrival of big money managers to the energy markets.
The hedge funds that have crowded into the energy markets in recent years don’t need coloured jackets or open pits. They need robust software programs that can transfer huge amounts of money instantly.
Caught off guard by the shift in the market, Nymex closed the London pit eight months later, and is now itself offering computer trading to compete with its rival.
“What the market wanted then [when ICE moved fully electronic], it doesn’t want now,†Nymex Europe chief executive Andy Gooch said.
