This quarter, the New York Mercantile Exchange (Nymex) plans to offer clearing services for over-the-counter (OTC) trades in "an expansive form." Though Nymex decided to enter this arena prior to the bankruptcy of Enron Corp., the exchange's president, J. Robert Collins Jr., notes that Nymex's new services can help fill the void left by Enron's collapse. "This has presented us with opportunities," Collins says. "We strive to fill that void." The Nymex board decided in late October to offer credit intermediation through clearing services and trading tools for the OTC gas market. The plan includes the introduction of exchange of futures for swap (EFS) transactions and large order execution to the gas futures market, along with electronic trading of cleared gas swaps and basis contracts. In addition, the exchange will introduce a cleared Henry Hub gas swaps contract, providing the marketplace with direct clearing on the energy swaps contract. As part of this move, the exchange will clear OTC-executed transactions through its EFS mechanism. "Combining these trading vehicles with our Henry Hub futures contract will offer market participants the advantages of these instruments in conjunction with one of the most liquid commodity markets in the world and provide greater stability to the market as a whole," Collins says. To help facilitate this process, Nymex purchased the assets of Confirmation Clearing Corp., a Houston-based start-up that provides software to confirm OTC energy transactions, in mid-December. Traditionally, the trade confirmation process for OTC deals was handled mostly by fax and telephone. The software can help prevent misunderstandings, he explains. The exchange plans to make this software available as part of its initiative to service the OTC trading community. "In the next few months, we plan to extensively broaden the products and services available to this segment of the trading community and truly make the New York Mercantile Exchange the one-stop shop for the entire energy industry," Collins says. -Jodi Wetuski

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