TEXT OF STORY
SCOTT JAGOW: When we talk about oil prices, a lot of times we get our numbers from the New York Mercantile Exchange. Or NYMEX. Last year, NYMEX in London tried to go old-school by opening a noisy trading floor. But today, it’s bagging that and going electronic. As Marketplace’s Amy Scott reports, this is all about a company called ICE.
AMY SCOTT: ICE stands for Intercontinental Exchange. It dominates trading of the benchmark Brent Crude oil contract. NYMEX tried to compete by opening a traditional trading floor in London last fall — the kind where brokers stand in a pit shouting at each other. But analyst Harrell Smith says customers preferred to trade electronically through ICE.
HARRELL SMITH: It really was a very short-sighted strategy.
Smith says by launching computer-based trading, NYMEX has a chance to catch up. But University of Houston finance professor Craig Pirrong says it won’t be easy.
CRAIG PIRRONG: NYMEX is not going to have a technology advantage. ICE is originally going to have the order flow advantage. I think it’s going to be a very uphill climb for NYMEX in London.
Here in the US, ICE is grabbing a bigger share of NYMEX’s business, by offering an electronic version of NYMEX’s biggest oil contract. In response, NYMEX has launched its own electronic trading with the Chicago Mercantile Exchange, while keeping its trading floor open.
In New York, I’m Amy Scott for Marketplace.
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