07/13/2005
Exchange President James E. Newsome said, "As the world's leading energy market, we are pleased to introduce these innovative OTC options to manage daily market volatility in the crude oil and natural gas markets. The auctions are a natural complement to our suite of existing exchange-traded products."
The auctions will be marketed to the world's leading energy market participants including a broad range of oil companies, institutional investors and other risk intermediaries, and will provide important hedging opportunities to participants in all the capital markets to manage oil-related volatility in non-energy related asset classes.
"These exciting new auction products are directly responsive to our clients' requests and fill a gap in the tools available to them for managing energy market risks" added Dennis Crum, CEO of ICAP Energy L.L.C. "Combining the Exchange's clearing capability and expertise with ICAP Energy's distribution will create a deep liquidity pool for Daily Settlement Derivatives and attract a global audience."
Richard Ruzika, Head of Commodities at Goldman Sachs, added that "The weekly storage auctions provided an important new tool and liquidity for the energy market. These daily auctions will apply the auction framework in a new and powerful way."
These auctions represent another successful implementation of a patented process of mutualized order filling developed and operated by Longitude, Inc., and build on the closely-watched auctions on economic derivatives launched by Goldman, Sachs & Co. in October of 2002.
The options will be traded through an auction format in which the options' prices are based solely on the relative demand of participants — the more popular the strike, the greater its value. The auctions aggregate liquidity across forwards, vanilla options and digital options and multiply the potential for efficient order filling.
Daily Settlement Derivatives will allow market participants to either hedge or take market risk directly associated with the daily swings in crude oil and natural gas prices. As with the existing auctions, these auctions will reveal the markets' expectations for the underlying number which has proven to be valuable information for all investors.
Daily Settlement Derivatives auctions on crude oil will take place from 8:30-9:00 AM while the auctions for natural gas will run from 8:45-9:15 AM. For more information, go to http://www.nymex.com or http://www.ndsdprices.com.
The New York Mercantile Exchange is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals. The Exchange introduced energy futures 26 years ago as the first successful price discovery and risk management tool for this vital marketplace.
ICAP is the world's largest voice and electronic interdealer broker with a daily average transaction volume in excess of $1 trillion, 50% of which is electronic. The Group is active in the wholesale market for OTC derivatives, fixed income securities, money market products, foreign exchange, energy, credit and equity derivatives. For more information go to www.icap.com.
Goldman Sachs (NYSE: GS) is a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.
Longitude, Inc. provides a patented, enabling technology that allows financial intermediaries to create innovative derivative products for their customers without assuming market risk. Longitude's clients are financial institutions and derivatives exchanges that make markets or facilitate transactions in the capital markets. Founded in 1999, Longitude is privately held and located in New Jersey. For more information, please go to www.longitude.com.