The last of the noisy “open outcry” trading exchanges – the New York Mercantile Exchange – is considering an initial public offering or even a merger, The Post has learned.
The NYMEX has been interviewing investment bankers to determine the best way to raise money.
Possibilities include a public offering valuing the exchange at as much as $3 billion, a private sale to oil companies and banks or a merger with its all-digital rival, the Intercontinental- Exchange (ICE).
The NYMEX and ICE had no comment on a possible merger.
A seat on the hectic NYMEX – the world’s largest market for oil, energy and metals – is also the world’s most expensive, at $1.6 million. That’s about 20 percent more than a New York Stock Exchange seat.
Although the NYMEX moved into its modern headquarters on the banks of the Hudson five years ago, it still trades nearly the same way it did when it opened 131 years ago – people shouting their orders and waving arms.
It hasn’t grown into its modern digs yet and has leased unused space to a smaller exchange selling sugar, cocoa and coffee – the New York Board of Trade – triggering open turf wars among employees over crowded elevators and parking lots.
But the biggest problem facing the NYMEX is how to handle its inevitable conversion – kicking and screaming – into the digital age, sources said.
The NYMEX and ICE are also involved in a federal court battle over who has the exclusive right to claim the official closing prices for oil, gas, electricity and other products.
ICE two years ago bought London’s big oil exchange, the International Petroleum Exchange – Europe’s biggest – but has had trouble convincing British traders to go all-digital in their trading.
The NYMEX has digital access to prices but doesn’t make orders digitally except in overnight activity.
Insiders say the exchange wants to avoid the humiliation the New York Stock Exchange has suffered for dragging its feet on technology and keeping operations cloaked from the public.
Officials of the NYMEX aren’t paid as lavishly as Dick Grasso, the NYSE’s former chief, who was awarded a $190 million package.
But some traders say a rich IPO would let some of the exchange’s brass cash out with enviable packages.
The NYMEX has 816 seat holders, each of which owns a share of both the exchange and its sister operation, the COMEX, which it acquired in 1994. The COMEX, which trades gold, silver and aluminum, has 772 seats that sell for $220,000 each.
Sources say the NYMEX has already ruled out at least two major Wall Street banks – Morgan Stanley and Goldman Sachs – from its plans.
Those two banks were major backers of the rival ICE group when it was started three years ago by entrepreneur Jeff Sprecher.
Veteran oil traders say they’d like to keep “open outcry” trading because it has simple bids and offers and doesn’t have any middlemen cornering trades, as the NYSE’s specialists do.
“I trust 200 pairs of eyes watching what everyone else does. I like those odds,” said one trader.
But many oil traders say they’d like to solve one big problem with : The three competing exchanges should spin off or consolidate their clearing houses, which hold billions in cash for margin accounts.
“If you’re trading with three exchanges, that’s three separate margin accounts soaking up your capital,” said one oil industry source.
“Traders would like to see one-stop shopping just so they can do trades across all the exchanges without so many complications,” the person said. “For just one contract with a lot of buy and sells of different products, you’d have to pay $28,000 into all the margin accounts; but with just one clearing house, you could do it all for only $2,800 in margin.”
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Hot offering
The New York Mercantile Exchange is considering an initial public offering. Facts about the exchange:
* It’s the dominant market for trading energy and precious metals.
* The NYMEX division is home to energy, platinum and palladium markets, while the COMEX deals in gold and silver.
* NYMEX also clears off-exchange trades and sells market data.