NYMEX Issues Statement Regarding Wall Street Journal Article

NYMEX Holdings, Inc. (NYSE:NMX), the parent company of the New York Mercantile Exchange, Inc., the world's largest physical commodities futures and options exchange, sent the following letter regarding the Wall Street Journal June 11 article entitled, "Where Senators See Flaws, NYMEX Defends Oversight." The letter follows:

TO THE EDITOR OF WALL STREET JOURNAL:

We want to clarify and correct several key points raised in the Wall Street Journal's July 11 story on the recent U.S. Senate Permanent Subcommittee on Investigations (PSI) report on the Amaranth situation and the testimony of the New York Mercantile Exchange, Inc. and other exchanges. In our view, the article omitted key facts or was misleading to readers in certain respects.

First and foremost, the article is totally silent on the PSI's fundamental conclusion on the overall integrity of the energy markets. The report's central theme emphasizes the continuing risk posed to the integrity of energy markets when a market participant can simply shift its trading from a regulated venue to an unregulated one, as Amaranth did. The PSI noted that "[t]he Amaranth case history demonstrates that, for regulators to make informed decisions to protect energy markets against trading abuses and unfair pricing, they need comprehensive information about trader positions. It is not reasonable to expect NYMEX or the CFTC to make sound regulatory judgments based upon incomplete and potentially misleading information about a trader's positions." NYMEX agrees; that was a key point in our testimony to the Senate Monday and will continue to be so at today's (July 12) House committee hearings.

Secondly, the article notes that NYMEX ordered Amaranth to reduce its positions on NYMEX in August of 2006. Missing from the article, but stated in the PSI report, was that NYMEX, following CFTC standards on maintaining orderly markets, specifically told Amaranth that it must comply with this directive in a "commercially reasonable trading manner" so as not to cause problematic market volatility. In fact, Amaranth's reduction of its positions did occur in an orderly fashion over the next several weeks, with minimal impact to natural gas trading. Regrettably, as enabled by the current regulatory framework, Amaranth complied with our directive by simply shifting the great majority of its positions in the front contract month and the following contract month from NYMEX, the regulated trading platform, to an unregulated trading venue. There is no basis in the PSI report or elsewhere that NYMEX's regulatory order in any way contributed to the eventual losses of Amaranth.

Finally, while noted in the article, we believe it is important to reiterate that the PSI's report and written testimony submitted by the CFTC for the recent PSI hearing both confirm the CFTC's view that NYMEX acted prudently and appropriately in enforcing its rules. A former CFTC official, Michael Greenberger, asserts in the article that NYMEX was conflicted in carrying out its self-regulatory obligations. In truth, NYMEX's market surveillance decisions, such as review of position limit violations, are handled entirely as a compliance staff function at the Exchange, with no consultation or review of any kind by the business component or the Board. The independence of these reviews is undertaken pursuant to market surveillance rules and procedures that have been reviewed repeatedly by CFTC staff and that have long been in place, interestingly, even dating back to Mr. Greenberger's tenure at the agency.

Richard Schaeffer Chairman
James E. Newsome
President and Chief Executive Officer