Dublin got its first taste of the high octane world of oil trading yesterday as traders from London and New York descended on the IFSC for the launch of "open outcry" trading of crude oil futures.
The New York Mercantile Exchange (NYMEX) launched a Brent crude oil futures contract in Dublin, just as its London-based rival, the International Petroleum Exchange (IPE), closed its Brent trading ring during morning hours.
The IPE move, part of a shift toward electronic trading, has proved unpopular with many London traders, especially those dealing on their own account. They prefer the "open outcry" trading method which requires buyers and sellers, gathered in a central location, to cry out bids and offers to each other.
This is the first time NYMEX has opened a new trading floor outside its New York base. It chose Dublin for the launch of the new contract, largely due to the speed with which it could get regulatory approval here.
The exchange is leasing space from the New York Board of Trade, whose Finex currency trading operation has been running from the IFSC for over a decade.
But many market observers believe that oil trading in Dublin could prove short-lived, with the business eventually moving back to London, the oil industry's European base, once approval is secured. NYMEX president Mr James Newsome said yesterday that the decision would ultimately be one for the market.
He said NYMEX, which has a one-year lease in Dublin, was in preliminary discussions with Britain's Financial Services Authority (FSA) and planned to seek regulatory approval in the UK. The exchange is also looking at potential sites in London.
"We think that this is the prudent thing to do. It provides us with maximum flexibility as to where we have this marketplace."
Meanwhile, the first day's trading got off to a good start yesterday with some 4,500 lots traded by early afternoon. NYMEX is initially targeting volume of around 10,000 per day. Around 40 brightly-clad traders were on the floor in the small Finex trading pit at the opening bell with more eligible to deal over the telephone.
"We thought that if we had 20 people in the ring it would have been great. We had double that so we're ecstatic," Mr Newsome said.
The exchange has offered attractive incentives to traders to encourage them to come to Dublin including a $1,000 weekly allowance for the first three months to help cover travel and living expenses. It is also waiving all transaction and clearing fees.
