'New York Mercantile Exchange (NYMEX)' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
The New York Mercantile Exchange proves to be the biggest physical commodity exchange for futures buying, selling, and trading in the world. Since they merged, it is comprised of both the NYMEX Division and the COMEX Division. At NYMEX, traders are able to trade platinum, palladium, and energy markets.
COMEX is where they trade FTSE 100 index options as well as silver, gold, and copper futures. NYMEX still keeps a place for the open outcry system where traders shout and make hand gestures to indicate their purchases. This operates only during the day time. After normal business hours, the electronic trading system takes over for the night.
The NYMEX origins go back to an association of Manhattan dairy merchants. In 1872, a group of them came together and formed the Butter and Cheese Exchange of New York. Once eggs joined the various dairy businesses handled on the exchange, they changed the name to Butter, Cheese, and Egg Exchange. By 1882 they had added canned goods, dried fruits, and poultry to the offerings. The name received its final change to reflect the broader product offerings as the New York Mercantile Exchange at this time.
Though COMEX Commodities Exchange and NYMEX used to be separately owned and run exchanges, they merged together to become two divisions of the NYMEX Holdings, Inc. back in 1994. They listed on the New York Stock Exchange on November 17, 2006 trading under the NMX ticker symbol.
In March of 2008, the CME Group of Chicago committed to a conclusive agreement to buy NYMEX holdings for $11.2 billion combination in cash and stock offerings. In August of 2008 the deal finished and NYMEX and COMEX began to function as DCM Designated Contract Markets for the CME Group. They joined sister exchanges the Chicago Board of Trade and Chicago Mercantile Exchange as part of the four DCMs.
In 2006, the New York Mercantile Exchange became almost entirely electronically traded. NYMEX keeps a smaller venue operating for those traders who prefer to engage in the open outcry historic and sentimental form of trading. There they utilize complicated hand signals and shouting while standing on a physical trading floor to buy and sell. The hand signal system is being preserved by a project published on the subject.
NYMEX’s headquarters is found in the Battery Park City area of Manhattan in Brookfield Place. They also maintain offices around the world in such cities as Washington D.C., Boston, San Francisco, Atlanta, London, Dubai, and Tokyo. The options and futures traded here on precious metals and energy commodities have developed into important tools for companies that are seeking to mitigate their risk through hedging their own positions. Because these various instruments are traded so easily and liquidly, companies are able to discern future prices and to hedge their future needs. This is why NYMEX has grown to become such a critical part of global activities in hedging and trading environments.
Today the NYMEX manages literally billions of dollars in metals, energy carrier, and other commodities that companies and traders sell and buy every day for delivery in the future. This is handled on either the physical trading floor or the electronic trading system by computers.
These prices on the exchange and its numerous transactions become the basis of pricing for individuals and companies who purchase commodities around the globe. The Commodity Futures Trading Commissions agency of the U.S. government actually regulates the NYMEX floor. Trading on the exchange is performed by independent brokers sent by specific companies.
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