New York Mercantile Exchange facts for kids
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| Subsidiary of the CME Group | |
| Founded | 1882 |
| Headquarters | One North End Avenue Manhattan, New York City, NY 10285 United States |
The New York Mercantile Exchange (NYMEX) is a special marketplace where people buy and sell important things like oil, natural gas, and metals. These are called commodities. NYMEX is part of a bigger company called CME Group, which is based in Chicago. You can find NYMEX in New York City, in a part of Manhattan called Battery Park City.
NYMEX has two main parts: the New York Mercantile Exchange itself and Commodity Exchange, Inc (COMEX). These two used to be separate companies. NYMEX started a long time ago in 1882. For many years, it was owned by the people who traded there. Later, NYMEX became a public company, meaning its shares could be bought and sold on the New York Stock Exchange. In 2008, the CME Group bought NYMEX. Now, both NYMEX and COMEX work as special trading places under the CME Group. Other trading places in the CME Group include the Chicago Mercantile Exchange and the Chicago Board of Trade.
At NYMEX, billions of dollars' worth of oil, energy, metals, and other goods are bought and sold every day. These deals are for future delivery. This means people agree on a price today for something they will receive later. The prices set at NYMEX help decide how much people around the world pay for these goods.
The trading floor at NYMEX is watched over by the Commodity Futures Trading Commission. This is a government group that makes sure trading is fair. Companies that trade at NYMEX send their own brokers to make deals. The people who work for NYMEX only record these deals; they don't actually buy or sell anything themselves.
Before 2006, much of the trading at NYMEX happened in a special area called a "pit." Here, traders would shout and use hand signals to make deals. This was called the open outcry system. Over time, more and more trading moved to computers. NYMEX closed its open outcry pit for good on December 30, 2016, because most trading was already happening online.
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Early history of NYMEX
Trading places for goods like food and metals began in the mid-1800s. Business people created these markets to make buying and selling easier. These places helped set rules for business and make sure goods were of good quality. By the late 1800s, there were many such markets near ports and railroad stations.
In 1872, some dairy merchants in Manhattan started the Butter and Cheese Exchange of New York. They wanted to bring order to their business. Soon, eggs were also traded there, and the name changed to the Butter, Cheese, and Egg Exchange. In 1882, the name changed again to the New York Mercantile Exchange (NYMEX). This was because they started trading other things like dried fruits, canned goods, and poultry.
As big warehouses were built in cities like New York and Chicago in the early 1900s, smaller trading places closed. This sent more business to larger exchanges like NYMEX. In 1933, COMEX was formed when four smaller exchanges joined together. These included exchanges for metal, rubber, silk, and hides. For many years, COMEX, NYMEX, and other exchanges shared a trading floor in a building called 4 World Trade Center.
What NYMEX traded
For many years, NYMEX traders did a lot of business with Maine's potato crop. Sometimes, people tried to unfairly control the price of potatoes. The worst event was in the 1970s, when a potato businessman named J. R. Simplot was accused of causing problems with many potato deals. This led to a big public outcry.
A new government group, the Commodity Futures Trading Commission, held meetings about it. NYMEX was stopped from trading potato futures. Its reputation was hurt. The head of NYMEX at the time, Michel Marks, said that the most important thing for an exchange is that its agreements are always honored.
After the potato trading stopped, NYMEX's future was uncertain. Most of its business had been in potatoes. Without a good product to trade, it was hard for traders to make money. Then, the new chairman, Michel Marks, and an economist named Arnold Safer, decided to try trading heating oil.
When the government made it easier to trade heating oil, NYMEX created a new futures contract for it. Trading started small in 1978. This new heating oil contract helped NYMEX get back on its feet.
NYMEX's business of trading oil and other energy products grew. This open market trading helped make prices clear for heating oil, and later for crude oil, gasoline, and natural gas. NYMEX's oil contracts were set up for a type of oil called West Texas Intermediate (WTI) to be delivered to Cushing, Oklahoma.
Growth of NYMEX
The energy trading business really took off, and NYMEX became very busy and successful. The trading floor was filled with shouting traders and special cards they used to show their deals. It became a place where many people could become wealthy.
COMEX, which shared the 4 World Trade Center building with NYMEX, used to think NYMEX was smaller and had a bad reputation because of the potato incident. But with the energy trading boom, NYMEX grew much larger and richer than COMEX. On August 3, 1994, NYMEX and COMEX officially joined together under the NYMEX name.
By the late 1990s, the NYMEX trading floor was too crowded. In 1997, NYMEX moved to a new, bigger building in Manhattan, which was part of a group of buildings called the World Financial Center.
Later history of NYMEX
September 11, 2001 attacks
The NYMEX building was very close to the World Trade Center towers, which were destroyed in the terrorist attacks on September 11, 2001. Some NYMEX people were lost in the tragedy. Even though the new NYMEX building itself was mostly okay, the area around it was badly damaged. Despite this, the exchange's leaders and staff quickly got trading working again.
After the attacks, NYMEX built a special backup trading center outside of New York City. This backup had many trading booths, telephones, and computer systems. It was built in case of another emergency in Manhattan.
Electronic trading
For a long time, NYMEX was the main place for "open market" oil trading. But in the early 2000s, new computer-based trading systems started to become popular. Companies like Intercontinental Exchange (ICE) began offering ways to trade oil contracts online, which were very similar to NYMEX's. This started to take away business from the traditional open outcry markets like NYMEX.
The traders in the NYMEX pits didn't like electronic trading because it threatened their jobs. But the leaders at NYMEX felt that online trading was the only way to stay competitive. In 2006, NYMEX teamed up with the Chicago Mercantile Exchange to use their electronic trading system called Globex. As a result, many traders left the pits, and banks and large oil companies started trading directly online.
During this time, NYMEX also helped create the Dubai Mercantile Exchange in the United Arab Emirates.
Changes in ownership
In 2006, NYMEX became a public company, and its shares were sold on the New York Stock Exchange. This made many of the executives and members who owned parts of the exchange much richer. However, many of the pit traders who rented their trading spots did not benefit as much.
Later, other parts of NYMEX were sold to different investors and to the Chicago Mercantile Exchange. The CME Group eventually owned the physical buildings and facilities of NYMEX. NYMEX became more of a brand name used by CME. By 2011, the old-style open outcry trading at NYMEX was mostly for a small number of people trading special types of contracts called options.
How trading happens
- Pit (open outcry): This was the traditional way, with traders shouting and using hand signals.
- Electronic trading (Globex): This is the modern way, using computers and online systems.
Things traded at NYMEX
- NYMEX Division
- COMEX Division
See also
In Spanish: New York Mercantile Exchange para niños
- Commodity Exchange Act
- Energy law
- New York Cotton Exchange
- List of futures exchanges
- List of traded commodities
- RBOB - (Reformulated Blendstock for Oxygenate Blending)
