The New York Mercantile Exchange opened its first overseas trading floor in oil futures Monday in a direct challenge to its main London-based rival, the International Petroleum Exchange.
About 40 traders began trading in the new Nymex Dublin pit for futures contracts of Brent crude oil, the European benchmark. Nymex enticed traders by waiving their usual trading fees for three months and paying up to $4,000 a month in relocation costs.
Nymex timed its Dublin opening to take advantage of the International Petroleum Exchange's move Monday to close its Brent crude pits during morning hours. The IPE intends to move eventually to exclusively electronic trading, a move designed to boost efficiency that could put some open-outcry traders out of business. The IPE responded by cutting its own fees.
Nymex President James Newsome said Monday he expected European oil-futures traders to gravitate toward his new floor, partly because Nymex already sells West Texas Intermediate futures, the No. 1-traded contract globally.
He noted that Dublin was in the same time zone as London and within an hour's flying time, but didn't rule out an eventual move to London, Europe's largest financial center.
"We are confident that this new facility will not only provide an open-outcry energy trading alternative during the European business morning, but also offer greater efficiency, more trading opportunities, and reduced financial commitment by putting the futures contracts on the world's two major crude oil benchmarks into a single clearing house," Newsome said.
Nymex is leasing its Dublin space from the New York Board of Trade, which operates Finex Europe, a futures exchange here. Newsome said Nymex had already spent more than $2 million in setting up the operation.
On the Net:
Nymex background on Brent crude, http://www.nymex.com/jsp/markets/bco_fut_descri.jsp