Traders I talked to on the floor of the New York Mercantile Exchange today were rather somber: not because oil futures saw the biggest dollar drop in 17 years but because those who own NYMEX shares watched the stock tank about 10 percent today.
Still--many traders were at least relieved they will still have a trading floor to come to after the CME Group acquires NYMEX Holdingsi n a $9.4 billion dollar deal that's expected to close in the fourth quarter.
The CME and NYMEX have been facing increasing competition from London's Intercontinental Exchange as well as the planned Electronic Liquidity Exchange, backed by a number of major financial institutions including Bank of America and JP Morgan Chase , and a similar futures exchange project in early stages of development in Europe.
Speaking this morning in an exclusive interview, NYMEX chairman Richard Schaeffer (see first video clip below) told me it was the right time to get the deal done. "We're being attacked by European exchanges, by markets around the world," he said. "It only makes sense to allow this deal to happen."
Analysts at Credit Suisse estimate the CME-NYMEX deal will add 1-2 percent to earnings next year and 3-5 percent in 2010, but the merger still must be approved by shareholders and regulators.
Regulatory risk is no small matter. The combined company will control more than 95 percent of all exchange-listed futures trading in the U.S., which critics say raises anti-competitive issues. Plus, the Justice Department has already voiced concern about the competitiveness of the exchanges' clearing operations.
Still, CME Group CEO Craig Donohue told me he is confident the deal will be approved, after all Justice signed off on the CME-CBOT deal last year. "We wouldn't be doing this transaction if we didn't feel that we'd be successful on the merits," he said. (My video interview with Donohue is followed by my interview with NYMEX CEO James Newsome.)
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