Nymex and Montreal form alliance

The New York Mercantile Exchange (Nymex) is to form a “strategic alliance” with the Montreal Exchange (MX), Canada’s largest financial derivatives exchange.

Choosing Valentines Day to announce its latest courtship, Nymex will purchase a 10% stake in MX to create a joint venture company that will serve the Canadian energy industry.

In a conference call to analysts and journalists, Luc Bertrand, president and CEO of the Montreal Exchange, announced that the Nymex purchase would be made via a “private placement in advance of our public share listing in March or April,” for C$88 per share.

No name has been given for the joint venture which will create a new Canadian corporation, headquartered in Calgary, Alberta, that will provide trading and clearing of exchange–traded and over–the–counter (OTC) crude oil, natural gas, and electricity products with a focus on the Canadian markets.

“We have a very simple goal, and that’s to bring Canada’s presence in the energy trading business in line with its established presence in energy production,” said Bertrand.

While the joint venture is still subject to a number of conditions including finalization of due diligence and documentation and other closing conditions, both parties believe that the closing date could be as early as March 7.

If approved, the joint venture will proceed in two phases. The first phase will see the new company offer clearing services to participants in OTC energy markets, focusing on financial and physical contracts based primarily on Canadian energy commodities. In the second phase, the joint venture will look to develop and expand on-exchange futures and options contracts on the same underlying commodities.

Nymex Chairman Richard Schaeffer has been invited to sit on the MX board of directors as part of the proposed deal. “Canada is a major center in the global energy markets,” he said. “We intend to fill the risk management gap that currently exists with the introduction of Canadian energy contracts."