Nymex To Introduce Temporary Exchange Of Options For Options Transactions In Energy Markets

The board of directors of the New York Mercantile Exchange, Inc., this morning voted to introduce a temporary program beginning tomorrow that will allow participants in its energy markets to exchange over-the-counter (OTC) options positions for options positions on the Exchange (EOO).

This program will have a fixed 30-day time limit and will end on December 28.

EOO transactions will work similarly to exchange of futures for physical and exchange of futures for swaps transactions. Two parties are allowed to privately negotiate the execution of on- and off-exchange options positions on pricing terms agreed upon by the involved parties. The transactions must involve approximately equal but opposite side-of-market quantities of options exposures in the same or related commodities.

These transactions will be permitted to liquidate, initiate, and transfer options market positions between the two parties involved in the transaction. The clearing member representing each party will be responsible to notify the Exchange of the amount and type of options contracts involved, the price at which the transaction should be cleared, and the identity of the parties involved.