Hundreds of the New York Mercantile Exchange's futures floor traders and administrative staff face losing their jobs if Nymex is acquired by CME Group.
"The CME Group's proposed takeover of Nymex would lead to a slew of 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," reports the Financial Times.
Options floor trading positions probably will remain intact, the FT says, citing unnamed CME sources. But buy outs are likely in store for the few futures pit traders who've survived since Nymex began offering electronic trading during open-outcry hours two years ago. Staff and management jobs within Nymex will be "gut" as well, a separate FT story says. Nymex had 500 employees at the end of 2006, according to its latest annual report.
The deal is the latest step in a trend to consolidate securities and futures trading venues and replace open-outcry with electronic platforms. Just last month, another century-old Manhattan futures institution, the New York Board of Trade, voted to close most of its trading floor and move its business to the all-electronic InterContinental Exchange, which Nybot acquired last year.
Last week, CME announced it's in talks to buy Nymex. Created when the Chicago Mercantile Exchange acquired the Chicago Board of Trade in 2007, CME already dominates trade in financial futures. The proposed combination would make it dominant in energy, precious metals and other physical commodities as well. It would create the world's largest derivatives exchange, which could control about 98 percent of U.S. listed futures volume.
According to the FT, Nymex will disclose official headcount figures later this month. It's thought to have less than 100 remaining futures pit traders, down from about 400 when side-by-side electronic trading was introduced in February 2006.
The amended bylaws of Nymex's Comex Division - another Manhattan commodity futures exchange that Nymex acquired in 2006 - require that in the event of a sale, the buyer must provide "a physical space ... located in the New York City metropolitan area" for Comex division members to trade open outcry products. However, the CME could meet that requirement by moving the Nymex floor to its existing disaster recovery site in Long Island while selling the Nymex headquarters in Manhattan's World Financial Center.
"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," says the FT. Floor traders own or lease trading privileges in the form of Nymex membership "seats."