If the deal wins approval from the Securities and Exchange Commission and Nybot members, Nybot will become a subsidiary of Ice. The New York exchange, which dates back to 1870, is owned by its members but voted to demutualise in May, since when various other exchanges, including the Chicago Board of Trade and the New York Mercantile Exchange have been linked to a possible takeover.
Nybot’s chief executive, Harry Falk, said: “This merger provides our unique traditional markets with the resources necessary to provide greater access and a higher level of service to our global users. It will allow us to continue using open-outcry trading, while providing a state-of-the-art electronic trading capability, giving our market participants a choice of how they wish to trade.” When questioned about tie-ups in February, Falk said that any suitor would have to accept the continuation of the open-outcry system.
Ice estimates $50 million in savings as a result of the deal, including around $40 million in clearing fees. Both parties emphasise similar growth and volatility in their respective markets. They say the merger will also help them develop new products, such as the ethanol contracts introduced by Nybot in 2004.
Ice closed its own London-based trading floor, the International Petroleum Exchange, in April 2005. It was Risk’s Derivatives Exchange of the Year in 2002 and 2005. Until the merger is completed, Ice has pledged to make its electronic trading platform available to Nybot members on ‘reasonable commercial terms’.