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The board also established an implementation schedule and retained the services of Andersen Consulting to work on the venture.
The Exchange plans to use its proven clearing infrastructure to introduce complete counter-party risk management for OTC trading, and create net margining with Exchange futures markets by calculating a consolidated clearing position. eNYMEX will provide a single, internet-based interface to both the OTC market and the Exchange futures market by routing futures orders to the trading floor and the NYMEX ACCESS® electronic trading system, depending on the session.
The Exchange's vision for the venture also includes pursuing strategic partnerships through which eNYMEX would provide clearing services to external organizations and creating a credit structure that will permit floor members to participate in OTC markets.
The range of OTC products offered will initially focus on swap contracts in crude oil, petroleum products, natural gas, and electricity, with some spot cash market products also offered. Over time, this would be expanded into such areas as precious and base metals, coal, and, potentially, bandwidth, weather, and emissions. Although the initial geographic focus will be on North America, contracts are also expected to be offered for some European and Asian locations.
In addition to today's launch announcement, the key milestones of eNYMEX, are expected to be a third quarter introduction of OTC trading, followed by Internet-based order-routing for futures trading, including a common interface for OTC and futures trading, and clearing and settlement of OTC trading.
Exchange Chairman Daniel Rappaport said, "The global energy and metals community has expressed a strong need for an electronic OTC platform that provides an open, independent, and neutral marketplace for trading by all participants, price transparency, counter-party credit risk management, and the liquidity created by simple standardized contracts."
Mr. Rappaport also enumerated several other advantages of eNYMEX over other available OTC systems: Leveraging the proven market management capabilities of the Exchange. The combination of the existing futures and options markets with the eNYMEX electronic OTC market provides an ideal combination of e-commerce with "bricks & mortar". The Exchange's established and well-regarded clearinghouse, which will be used to provide counter-party risk management Net margining of positions across the futures and OTC markets, providing significant cashflow benefits to participants trading across markets and commodities.
eNYMEX will be a wholly owned, for-profit subsidiary of the New York Mercantile Exchange.
