Nymex makes EOO trading permanent

The New York Mercantile Exchange (Nymex) yesterday said that it will make exchange of options for options (EOO) trading in energy markets permanent.

The programme, which was first introduced at the end of July 2002 and was scheduled to end today, allows participants to exchange over-the-counter options positions for options positions on the exchange.

EOO transactions are similar to exchange of futures for physical and exchange of futures for swaps transactions. Two parties are allowed to privately negotiate the execution of on- and off-exchange options positions on pricing terms agreed upon by the involved parties. The transactions must involve approximately equal but offsetting options positions in the same or related commodities.

These transactions are permitted to liquidate, initiate and transfer options market positions between the two parties involved in the transaction. The clearing member representing each party must notify Nymex of the amount and type of options contracts involved, the price at which the transaction should be cleared, and the identity of the parties involved.