The New York Mercantile Exchange plans to introduce electronic routing of orders to its "open outcry" trading pits as it braces itself for competition from the Chicago Board of Trade in gold and silver futures.
The development comes a month after the CBOT unveiled details of a plan to challenge the Nymex's grip on trading of full-sized gold and silver futures by offering them on an electronic basis on October 6.
Nymex now plans to introduce on the same day a new system, known as Neon, that will automatically send a customer's order to Nymex's gold and silver pits. Currently, customers typically talk to floor clerks by phone.
Nymex is the largest energy futures and gold and silver futures exchange but trading is still done overwhelmingly in its open outcry pits. The development, first reported in Futures & Options Week, could come with trading fee rebates for orders directed through Neon, but Nymex has yet to decide on the issue.
Nymex plans to expand the Neon system, which has been in development for about a year, across its energy trading pits later.
The introduction of electronic order routing does not mean trading itself can be done electronically.
Nachamah Jacobovits, Nymex spokeswoman, said customers would also still be able to pick up the phone and call in orders. "We think our big advantage is open outcry; it's the source of liquidity for our markets. We're looking to reinforce that, not take away from it."
Nymex's insistence that open outcry still has a role in markets where electronic trading is increasingly dominant reflects the balancing act that futures exchanges in the US are being forced to manage as electronic trading has encroached on their pits.