On October 23, the Exchange received a favorable private letter ruling from the Internal Revenue Service notifying the Exchange that there would be no tax consequences to it or any of its members as a result of its demutualization. This ruling was the final approval required for the demutualization of the Exchange to take effect. The plan was previously approved by the Securities and Exchange Commission, the Commodity Futures Trading Commission, and a 97.5% majority of the Exchange members.
Exchange Chairman Daniel Rappaport said, “The Exchange has moved decisively and rapidly in its pursuit of this demutualization and the various requisite regulatory approvals. This approach is indicative of the progressive and innovative manner in which we will proceed as a for-profit corporation to reposition the Exchange as a 21st century business enterprise that will create and pursue profitable new opportunities, react rapidly and decisively in an increasingly competitive marketplace, and explore interest by outside investors.”
As a result of the transaction, the Exchange, which was a not-for-profit membership corporation under New York law, has been reorganized as a for-profit membership corporation under Delaware law and will be renamed New York Mercantile Exchange, Inc. A new stock-holding company named NYMEX Holdings, Inc., was formed to own all of the economic interests and most of the voting control in the for-profit membership corporation. Each existing NYMEX Division membership has been converted into one share of common stock in NYMEX Holdings, representing equity in the overall organization, and one membership in the Exchange representing trading privileges.
The common stock and trading privileges will not be separable until a majority of stockholders vote to permit separate trading of the common stock and trading rights.
The Exchange is the largest physical commodity exchange in the world, with volume reaching close to 110 million contracts in 1999. On average, approximately $14 billion worth of transactions occur on the Exchange on a daily basis, with $3.3 trillion changing hands last year. The futures and options contracts traded at the Exchange are based on such strategic commodities as crude oil, heating oil, unleaded gasoline, gold, silver, natural gas, electricity, copper, and aluminum.
