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Nymex To Lower Cost Of Exchange Of Futures For Swap Transactions

Date 02/11/2001

The New York Mercantile Exchange, Inc., today announced that it would lower the cost of exchange of futures for swap (EFS) transactions to $2.50 per contract per side from $10 per contract per side and would apply the discounted fee retroactively to the natural gas transactions conducted since the start of the program yesterday.

Exchange President J. Robert Collins, Jr., said, "We are gratified that the strong response to the introduction of this trading instrument will allow us to so heavily discount the transaction fee."

EFS transactions work similarly to exchange of futures for physical (EFP) transactions. Two parties are allowed to privately negotiate the execution of an integrated over-the-counter swaps and related futures transaction on pricing terms agreed upon by the involved parties. The transaction must involve approximately equal but opposite side-of-market quantities of futures and swap exposures in the same or related commodities and are permitted until two hours after trading terminates in the underlying futures contract.

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

Year-to-date average daily volume in natural gas futures is approximately 60,000 contracts. Yesterday's volume, including the EFS transactions was 73,364 natural gas futures contracts.