NYSE Begins Metals Mini-Options - Analyst Blog
February 29 2012 - 11:00AM
Zacks
On Monday, NYSE Euronext Inc. (NYX) announced
that its futures exchange in the U.S. – NYSE Liffe – has
successfully launched its mini-sized options on gold and silver
futures contracts. NYSE Liffe is the former London International
Financial Futures Exchange, which trades coffee, sugar, cocoa and
wheat futures.
Moreover, the options on NYSE Liffe U.S. 33.2 ounce (oz.) mini
gold and 1,000 oz. mini silver futures contracts provide traders
flexibility by offering multiple trading strategies. Such option
contracts should enable NYSE to enhance its risk management
efficiencies, thereby strengthening the fundamentals and liquidity
of the futures market for precious metals.
The launch of mini-sized contracts has been initiated in order
to help the trading of options of the previous metals to reach out
to smaller consumers and the rising demand of these markets.
Meanwhile, following the collapse of its merger deal with
Deutsche Boerse, NYSE has been meticulously working to enhance its
efficiencies through technology and risk management upgrades.
Simultaneously, the company also seeks to expand its options
business through metal exchanges.
In this context, recently NYSE has shown significant interest by
submitting its bid this month for London Metal Exchange (LME),
along with other derivative giants – CME Group
Inc. (CME) and IntercontinentalExchange
Inc. (ICE). The business of LME blends well with NYSE
Liffe’s soft and agricultural commodity derivative business.
On the flip side, addition of LME to CME’s basket could enhance
its metals exchange, Comex. Hence, the deal is also considered
important for other derivative exchanges, such as CME and
IntercontinentalExchange, in order to boost their competitive
strength in Europe.
While LME is reviewing the bids, its owners are apprehensive
about safeguarding its business model, we believe the complex
structure of its futures contracts and its network of registered
warehouses could pose some issues in the business sale.
Besides, in an attempt to increase its global market share, on
Monday, CME also announced its strategic alliance with Japan's
foremost vendor of energy price and information services – RIM
Intelligence – in order to develop the clearing services for
over-the-counter (OTC) risk management products that are used by
the energy industry in Japan. Besides, the energy products will be
listed and are subject to the rules of NYMEX and will be cleared
through CME ClearPort.
CME expects to launch the energy products later this year.
Management believes that RIM’s trusted price yardstick in the
Japanese energy market should blend well with CME’s long-term
growth strategy of expanding its energy markets across the
globe.
Both NYSE and CME carry a Zacks Rank #3, implying a short-term
Hold rating, while the long-term stance remains Neutral.
CME GROUP INC (CME): Free Stock Analysis Report
INTERCONTINENTL (ICE): Free Stock Analysis Report
NYSE EURONEXT (NYX): Free Stock Analysis Report
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