From: Reuters
Published February 1, 2008 10:09 AM

Nymex profit jumps on higher electronic trade

By Lilla Zuill

NEW YORK (Reuters) - Nymex Holdings Inc <NMX.N>, parent of the New York Mercantile Exchange and the target of an $11 billion takeover bid by CME Group Inc <CME.N>, posted a better-than-expected fourth quarter profit on Friday, helped by growth in electronic commodities trading.

The buyout proposal, announced on Monday, keeps up a breakneck pace of consolidation among U.S. and global financial exchanges, as stock markets seek to expand their reach and market share in such areas and equities and options trading.

Net income jumped 50 percent to $63.5 million, or 67 cents a share, from $42.3 million, or 48 cents a share, in the year-earlier period.

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Operating revenue for the energy and metals exchange rose 38 percent to $172.6 million.

Analysts' average earnings forecast was 65 cents a share on revenue of $172.4 million, according to Reuters Estimates.

Fourth-quarter clearing and transaction fees rose 38 pct to $144.9 million, and average daily trading volume in the period was 1.54 million contracts, up 28 percent from a year earlier.

CME BID

CME, the parent of the Chicago Mercantile Exchange, said on Monday it was in talks to buy Nymex for $11 billion in cash and stock. The two parties agreed to a 30-day period of exclusive negotiations, and CME has said it would keep a trading operation in the New York area were the deal to be agreed.

Schaeffer declined to discuss the deal any further, on a post-earnings conference call with investors on Friday.

As part of the deal, CME may also offer to buy out 816 Nymex memberships for up to $500 million. When asked if members had measures to block a bid, Schaeffer again declined to comment.

Cost-cutting initiatives that Nymex earlier adopted would not be stalled by the deal talks, Schaeffer added, and could even be accelerated. Nymex is also moving forward on the sale of its lower Manhattan headquarters, he told investors.

Earlier this month Nymex's board adopted "change in control" measures that would bolster the rights and benefits of certain executives were they to lose their jobs in a sale of the company.

It also inked its approval for the payment of bigger bonuses to Schaeffer and Chief Executive James Newsome, doing away with a cap on incentive payments that had been instituted when Nymex was private. The company launched its public listing in November 2006.

GREEN MACHINE

Schaeffer said Nymex was meeting with partners in its venture, "Green Exchange" later on Friday, and is scheduled to launch the carbon emissions trading platform by the end of the first quarter.

"We expect we will become the primary exchange for environmental markets contracts," he said.

Nymex's partners in the venture include Evolution Markets and ICAP <IAP.L>. The plan calls for offering both exchange-traded and over-the-counter clearing services.

Schaeffer said he also sees Nymex expanding its European operations, and its ClearPort platform. "It is a gold mine for the future," he told investors. "It will roll out to be the credit remediation product for a number of commodities."

Shares were down 5 cents to $114.95 in early trading on the New York Stock Exchange.

(Reporting by Lilla Zuill; editing by John Wallace, Gerald E. McCormick and Derek Caney)

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