NYMEX Holdings, Inc. (NMX.DL)

NetscribeFinancl (< 20) Submitted: 3/19/07 2:22 AM : Start Price: $130.07 NMX.DL Score: 29.89

NYMEX followed the recent trend among U.S exchanges of going public and whose initial public offering had a great demand helping it mop around $300 million. It owes its success to the simple business model enabled by technology and attractiveness of the futures instrument. Huge fixed cost makes entry difficult and low variable margins help it post margins around 50%.


Recent quarter results have helped strengthen its positions as the leading market place for energy and metals trading. Its relationship with Chicago Mercantile Exchange would help list its energy contracts on the CME Globex electronic trading platform. Clearing and transaction fees, and market data fees account for 84% and 13% of the total revenues.


Strategy of the exchange has been to focus on joint ventures in other countries that would capitalize on its expertise in energy products. Reflecting the same it has inked a deal with Montreal Exchange to serve the Canadian market. A lot rest on its ability to make the joint venture with Dubai Mercantile Exchange a grand success. Endorsing the same it has plans of launching jet fuel futures and approval for the Singapore and Japanese investors to trade in its electronic market comes as good news. However, the margins would be hurt for the project due to the fees waiver for the initial three months to garner liquidity.


Traditionally influenced by trading members that has been detrimental to the long-term growth prospects, but is turning out to be more professional considering the interest of shareholder in mind. Its refusal to enter electronic trading in 2005 gave way for Intercontinental Exchange to steal market share. The strong performance of the share performance after listing was primarily due to supply-demand constraints or the limited float shares available for public trading. Of late, it has been facing intense competition and profits depend on the sole crude oil. Government legislations for futures trading and regulatory hurdles in the hedge fund can hurt the trading volumes apart from the volatility of the commodity prices. Moreover it is trading at an exorbitant premium when compared to its peers, implying its future performance already embedded in the price.

Report this Post Replies: 0 | Reply