New York Mercantile Exchange (NYMEX) – Definition

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New York Mercantile Exchange Definition

The New York Mercantile Exchange (NYMEX) is the world’s 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).

A Little More on What is the New York Mercantile Exchange

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.

References for the New York Mercantile Exchange

Academic Research on New York Mercantile Exchange

The death of copyright protection in individual price valuations, a flawed merger doctrine, and financial market manipulation: New York Mercantile Exchange v …, Murray, J. V. (2009). Buff. L. Rev.57, 279. According to this paper, the death of the copyright protection which explains the valuation in the individual price of the commodity was explained. This valuation is however termed as a flawed merger doctrine and financial market manipulation. In a nutshell, this paper explains the York Mercantile exchange valuation.

New York Mercantile Exchange Egg Prices and Urner Barry Egg Quotations, Darrah, L. B., Forker, O. D., & Miller, R. L. (1968). According to this research paper, the New York Mercantile Exchange egg prices and the Urner Barry egg were explained and the correlation between these two markets was as well sated in this research paper.

Control on the New York Mercantile Exchange: Seat Ownership, Membership, and Voting Rights, Faber, A. E. (1996). Hofstra L. Rev.25, 639. This paper explains the control measures imposed on the New York Mercantile Exchange rate via the seat ownership, membership and voting right.

Uses Maine Potato Growers Make of the New York Mercantile Exchange, Merchant, C. H. (1957). According to this academic research paper, Maine potato growers were used as an example to explain the New York Mercantile Exchange policies that take place in the futures market especially in the agricultural sector.

Experience of the New York Mercantile Exchange, Seetin, M., & Palmer-Huggins, D. (1999). This paper explains the experiences of the new/reformed New York Mercantile Exchange and also the ways in which these new improvements have helped to control the activities in the agricultural commodity and product market.

Can the New York Mercantile Exchange make coal a tradable commodity?, McFall, K. (2002). This paper asked the question of how the New York Mercantile Exchange can give rise to a tradable commodity. This question, however, was answered in this paper and the result was recorded.

Cost and benefits for using NYMEX (New York Mercantile Exchange) crude oil futures, Deaves, R., & Krinsky, I. (1991).  According to this paper, the crisis in the Persian Gulf industry in the 1990-91 has shown how germane it is for end users of the petroleum industry to be able to reduce the risk of unexpected change in price. This paper explains the nature of these costs and benefits are discussed and explained and related analysis of this data gotten from the York Mercantile Exchange (NYMEX) crude oil futures market was explained. Although, the market appears to be effective and efficient when the past basis and returns are used as an explanatory variable and there is some evidence that the future return may be predicted using variables from macroeconomics.

New York Mercantile Exchange (NYMEX), Inglis-Taylor, A. (1995). In Dictionary of Derivatives (pp. 409-428). Palgrave Macmillan, London. This paper explains in full the meaning and the process by which the New York Mercantile Exchange affects the futures markets.

Price–Volume Relationship of Energy Futures Traded on the New York Mercantile Exchange, Shie, F. S., & Lin, J. C. (2015). International Research Journal of Applied Finance6(4), 366-393. This paper presents some evidence for the presence of a causal relationship between the volume and price in the crude oil futures market. The result got from the linear causality testing, however, shows the influence of causality running from volume to price but never from price to volume. Generally, there is no evidence for the sequential information arrival assumptions and the noise trading model but never for the efficiency of the market. A variation in the result was also observed according to this paper but this depends on the sample period.

Bad Faith Strictly Defined for Private Commodities Lawsuits: Sam Wong & Son, Inc. v. New York Mercantile Exchange, Barry, J. M. (1984). John’s L. Rev.59, 772. This paper explains the bad faith which was particularly designed for private commodities lawsuits. This paper explains this process based on the New York Mercantile Exchange.

Price Discovery and Energy Risk, or How Futures Contracts Are Changing the Energy Markets Forever: The Case of the New York Mercantile Exchange, RAPPAPORT, D. (2000). The Journal of Risk Finance1(4), 33-42. This paper explains the role of the exchange-traded futures and the options contracts found within the worldwide energy markets as well as the concept, strategies and application that have grown to a higher level of versatility and sophistication and hence could not have been foreseen for over 150 years ago. The first function of the NYME is the hedging of price while the second function of the New York Mercantile Exchange is the price discovery. These two functions were explained in this study.

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