New York Mercantile Exchange (NYMEX) - Explained
What is the New York Mercantile Exchange?
Written by Jason Gordon
Updated at October 6th, 2021
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Table of Contents
What is the New York Mercantile Exchange?How Does the New York Mercantile Exchange Work?What is the New York Mercantile Exchange?
The New York Mercantile Exchange (NYMEX) is the worlds largest exchange, trading physical commodity futures. It was founded in 1872 and is currently owned by the Chicago Mercantile Exchange Group (CME). The other three exchanges operated under the Chicago Mercantile Group are; the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT) and Commodity Exchange, Inc. (COMEX).
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How Does the New York Mercantile Exchange Work?
The NYMEX was acquired by the Chicago Mercantile Group in 2008 for $11.2 billion in cash and stock. The headquarters of the NYMEX is located in Manhattan, New York City, and its other offices are in Washington, Boston, San Francisco, Atlanta, London, Tokyo, and Dubai. Billions of dollars worth of metals, energy carriers, and other commodities are traded on the floor, as well as on the overnight electronic trading computer systems for future delivery. The energy futures and options contracts including contracts of crude oil, heating oil, natural gas, gasoline palladium, platinum, gold, and others are traded on the NYMEX. The earliest version of the NYMEX was formed in 1872, as a group of Manhattan dairy merchants founded the Butter and Cheese Exchange of New York. After a few days, the trading of the egg was included in it and the name was changed to Butter, Cheese, and Egg Exchange. The name New York Mercantile Exchange was first used in 1882 when the dried fruits, poultry, and canned goods were added to the list. During the economic crisis of 2008, the NYMEX was acquired by the Chicago Mercantile Exchange Group as it became difficult for the exchange to survive commercially. After this acquisition, a number of energy products, as well as metals and agricultural contracts, were added to the list of trading by the NYMEX. NYMEX is regulated by the Commodity Futures Trading Commission (CFTC), an independent market watchdog under the federal government of the United States. The NYMEX plays a vital role in trading and hedging, as it enables the companies to manage their risk by using futures and options on energy and precious metals. The total volume of the daily exchange of the CME group is about 30 million contract and 10% of it is traded on the NYMEX. The companies trading on the NYMEX send their independent brokers to participate in the open outcry. The employees at the NYMEX record the transaction, while the independent brokers trade on behalf of the large companies.