NYMEX: what it is, what it is for and the impact on the world economy

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NYMEX: what it is, what it is for and the impact on the world economy
NYMEX: what it is, what it is for and the impact on the world economy © Spencer Platt / Staff Getty Images News

NYMEX, or New York Mercantile Exchange, is the main world market for futures and options on energy products, such as oil and natural gas; on precious metals, such as silver, gold, palladium and platinum; and on industrial metals, such as aluminum and copper.

Trading on NYMEX takes place with the Open Auction system, a continuous auction carried out by operators in a physical floor, combined with the most advanced telematic electronic trading systems. NYMEX was owned by the members who traded there.

Later, NYMEX Holdings, Inc., the former parent company of the New York Mercantile Exchange and COMEX, went public and became listed on the New York Stock Exchange on November 17, 2006, under the ticker symbol NMX. Chicago based CME Group signed a definitive agreement to acquire NYMEX Holdings, Inc.

for $11.2 billion in cash in 2008, and stock and the takeover was completed in August 2008. Both NYMEX and COMEX now operate as designated contract markets (DCM) of the CME Group. The other two designated contract markets in the CME Group are the Chicago Mercantile Exchange and the Chicago Board of Trade.

Although mostly electronic since 2006, the NYMEX maintained a small venu that still practiced the open outcry trading system, in which traders employed shouting and complex hand gestures on the physical trading floor. A project to preserve the hand signals used at NYMEX has been published.

The prices quoted for transactions on the exchange are the basis for prices that people pay for various commodities throughout the world. The New York Mercantile Exchange handles billions of dollars' worth of oil transactions, energy carriers, metals, and other commodities being bought and sold on the trading floor and the overnight electronic trading computer systems for future delivery.

A few employees on the floor of the exchange represent a big corporation and the exchange employees only record the transactions and have nothing to do with the actual trade. The floor of the NYMEX is regulated by the Commodity Futures Trading Commission, an independent agency of the United States government. Each individual company that trades on the exchange must send its own independent brokers.