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Energy

There are three major energy exchanges. The International Petroleum Exchange of London trades an active Brent Crude Oil and a Gasoil (heating oil) contract. The Tocom (Japanese) trades active gasoline and kerosene contracts. The predominant Exchange, however, is the New York Mercantile Exchange.

When I first entered the business, a part of my training program at Merrill Lynch was a tour of the Exchange floor. The New York Exchanges are housed in the same building, and after touring the wild and woolly COMEX (where the metals are traded—now a wholly owned division of the NYMEX), we passed a pit with four or five traders, not one of which was shouting out bids or offers. (In fact, a few of them were reading the paper.) We were told this was the NYMEX, the “poor man's Exchange,” also called the “Potato Exchange,” where platinum was the major contract (we really didn't know what that was at that time). Potatoes also were traded here, however inactively due to a delivery default. In addition, they had a “boneless beef” contract that, on a good day, traded 50 lots. You could have bought a seat for $2,000, but then the $100 per month dues made this appear to be a losing deal. A few years later, they had the foresight and good fortune to register their No. 2 Heating Oil contract with the CFTC and start trading it in 1978. Now, this is one of the world's major Exchanges, and you can't buy a seat for less than $1,500,000. (If only we had known in those “poor man” days and had picked up a few of those cheap seats!)



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