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NYMEX Seat Prices
Started:June 2nd, 2016 (07:53 PM) by Tseanami Views / Replies:325 / 2
Last Reply:June 3rd, 2016 (10:06 AM) Attachments:0

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NYMEX Seat Prices

Old June 2nd, 2016, 07:53 PM   #1 (permalink)
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NYMEX Seat Prices

Can anyone offer any insight as to why NYMEX seat prices have been pretty much stagnant for the past few years, or on a very slow decline, at least? I feel like demand for a seat would only go up over time with the emergence of high-frequency trading since it's basically a discount card for trading NYMEX products.

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Old June 2nd, 2016, 07:53 PM   #2 (permalink)
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Old June 3rd, 2016, 10:06 AM   #3 (permalink)
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In the last 2.5 years my NYMEX seat lease has dropped from 900/month to 500/month which is 45% drop. Since the CME has announced the complete closure of the NYMEX floor in the coming months it looks like they have halved again in price. (Look at the latest prices here)

I personally would classify that as a precarious drop.

Seats & their leases used to offer three major benefits. Ownership of a seat, was ownership of part of the exchange, and had associated voting rights.The second major benefit was access to the trading floor. Every trader in the pit had to have an associated seat. The third major benefit was reduced exchange fees. This was important for locals and large trading companies, but not for brokers executing client order floor.

When the exchanges went public, the owners got bought out and the seats no longer represented their ownership value. As the importance of the pits has declined, the value of the seat as a way to access the floor/pit has also declined to the point that it is now almost worthless. What remains is the value of reduced clearing fees. At a saving of 75c/side ($1.45 vs 70c) and a current seat price of only $250 you only need to be trading 333 lots/month for it to be economical to lease a seat.

I feel like demand for a seat would only go up over time with the emergence of high-frequency trading since it's basically a discount card for trading NYMEX products

I believe there are just over 800 seats, so I guess this is telling is that there are less than 800 people who both know about the seat benefits (many do not) and trade more than 333 lots a month.

You need to factor in that there are a lot less high frequency traders than there were floor traders. Also with regards to energy and NYMEX specifically there are lot less energy trading companies than their used to be and all these companies used to have seats. In fact I believe if you are a company (as opposed to an individual) you actually need two seats to get reduced fees.

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