Comex board approves dollars 50m takeover by Nymex

THE board of Comex, the New York commodity exchange that trades gold and silver futures, has agreed in principle to a dollars 50m takeover by the New York Mercantile Exchange.

The money will be paid to Comex members over four years.

Nymex is the world's largest energy futures market, and America's third-largest futures exchange.

It has been talking with Comex, the fourth-largest, about a possible takeover since April, when merger talks between Comex and the Chicago Board of Trade broke down over concerns about competition from the London Metal Exchange.

Comex and Nymex share the same trading floor in the World Trade Center in New York City's financial district.

A merger would allow the exchanges to cut costs on staff, clearing and marketing, and become a cheaper, more competitive arena for trading, Comex's Alan Hanson said.

But a deal is still months from completion. A legal document containing the merger terms will be drawn up next. Memberships of both exchanges, and the industry regulator, the Commodity Futures Trading Commission, must approve the arrangements.

Comex says that it does not need a merger from a financial perspective, with dollars 18m in its coffers. But the slump in metals prices during the 1980s left it vulnerable.

Nymex originally offered dollars 10m for Comex this spring, which Comex members refused. The offer coincided with a surge of volatility in precious metals markets and a sharp increase in trading in Comex gold and silver futures contracts.

The membership is divided on the merger, Mr Hanson said.

But the revival of interest in precious metals has caused some members to question the need for it, and has strengthened the exchange's bargaining power.