From today's Toronto Star: TSX, NymexReport has TSX, Nymex talking possible alliance
Jun. 3, 2006. 09:41 AM
LEAH MCGRATH GOODMAN
DOW JONES NEWSWIRES
NEW YORK—Putting it in the race to mint North America's first stock-futures combo, the New York Mercantile Exchange is in discussions with TSX Group Inc., owner of the Toronto Stock Exchange, about forming an alliance and possibly acquiring TSX's Natural Gas Exchange, people close to Nymex say.
The talks come alongside a joint announcement late Thursday by NYSE Group Inc. and Euronext NV confirming their plans to merge stock, futures and derivatives markets in a marriage of equals.
While financial terms have yet to be finalized, Nymex is considering offering TSX 10 per cent of its equity for full control of Calgary's Natural Gas Exchange in a swap valued at roughly $150 million (U.S.), the people said. Natural Gas Exchange runs one of North America's most popular and diverse electronic-trading platforms for physical and swap natural gas transactions.
But the proposed deal doesn't end there. Nymex, the U.S.'s largest futures exchange for energy and metals, and TSX, the world's biggest market for energy and metals stocks, would jointly offer commodities, stocks and futusres through a single electronic-trading screen, said the people, who spoke on the condition of anonymity.
TSX spokesman Steve Kee and Nymex spokeswoman Anu Ahluwalia declined to comment on whether TSX and Nymex were entertaining a partnership.
"TSX Group has ongoing discussions with a number of the major exchanges," Kee told the Toronto Star's Tara Perkins. "In fact this week, our CEO attended a World Federation of Exchanges meeting in Chicago .... We will not comment on any of the specifics of those discussions."
Tom Caldwell, chairman of Caldwell Financial Ltd. and former governor of the Toronto Stock Exchange, told the Star a deal between the TSX and Nymex "would make sense."
The derivative markets — futures and options — are growing at three times the speed of stock markets, he said, and represent "the big money and the real growth."
Futures lock in the price to buy or sell a commodity that is to be delivered in the future. Options give holders the right to buy or sell without obligating them to do so.
Given that a large portion of the world's mining and energy companies list their stocks on the Toronto Stock Exchange, it makes sense for the TSX to own a piece of the Nymex, where oil and metals are traded, Caldwell said. "I can rationalize that as a decent move."
About 60 per cent of the world's publicly traded mining companies are listed with the TSX Group. The TSX also had the highest number of listings of oil-and-gas issuers in the world.