Tax Issues Could Affect CME-Nymex Merger

Chicago Tribune is reporting that tax questions could interfere with the merger agreement reached March 17, 2008 — representing CME Group’s (CME) $8.3 billion offer to acquire NYMEX Holdings (NMX).

With less than a few days before the August 18 deadline for NYMEX and CME Group shareholders to vote on the transaction — Nymex members seem to have objections as to how the payments from a revised offer made by the CME Group on July 18 would be classified for the IRS.

The revised agreement allows NYMEX Class A members to be charged lower fees than non-members on current NYMEX products, while also increasing the consideration payable to NYMEX Class A members from $612,000 to $750,000 per membership.

However, based on statements the CME Group filed with the Securities and Exchange Commission last Thursday, conventional income on the $750,000 payment could be taxed at a rate as high as 32%, consequently eliminating any financial gains stated in the amended terms.

This fact has led Nymex members to now ask for terms of the deal to get renegotiated, in a deal the CME Group called its “full and final offer”.

The change in Class A member rights requires the affirmative vote of the owners of 75% of the 816 Nymex Class A memberships, which currently are entitled to a share of revenues from electronic trading, a benefit they would no longer have once merger gets finalized.

The approval of these amendments is a condition to the closing of the merger.

Separately, NYMEX and CME Group have announced an agreement to extend the term for their highly successful technology partnership for an additional two years until 2018, and delay the early termination right of either party by one year.

Comments

[Bill Kear:]

Oil slicks

Nymex /Cme monopoly in clearing has muscle with the government
backed approval of James e Newsome on the board of the CFTC,
the National future Association and the NYMEX.

The fox watching the hen house offers up the notorious traders
and owners of the exchange plenty of retail traders ready
to be fleeced without a chance of restitution.

They have already shown their skill by opening the exchange
for a special shake out session and ran the stops while the brokers
were shut for the holiday.



I LOST 2K TO THIS SCAM

Nymex opened for trading at 2:30 pm Sunday (after having anounced that they would be closed for holiday)

Brokers were closed and small traders (net longs-see cftc commitment of traders report) were caught
unaware of their accounts being looted by local large traders heavily shorting.
They ran the stops in
the illiquid markets if the longs were lucky enough to have a stop.

Nymex never announced when they were going to close and were not answering their phones. Brokers
were not in to take orders and those with electronic trading cannot even get solid confirmation of
their trades. As of now millions of dollars have been lost by the longs who cannot establish their account balances. Nymex has still not issued a closing price(9/2/08-- 2am).

Buy the stock but don't trade on the exchange if you care to
keep your wallet full.


Bill Kear

2008 Sep 07 06:43 AM