Just three months after trading in crude oil futures got under way in Dublin, the "open outcry" trading ring in the International Financial Services Centre (IFSC) is set to close.
The New York Mercantile Exchange (NYMEX) said yesterday that it was planning to open a trading floor in London as soon as possible, a move that would result in the closure of the Irish operation.
NYMEX president James Newsome said that the exchange was in talks for trading floor space and had applied for an operating licence with Britain's Financial Services Authority (FSA).
A NYMEX spokeswoman confirmed that the decision to open a London trading floor meant that the contract would move from Dublin to London. She also said the exchange had "no initial plans" to replace the Brent crude contract with a different contract.
NYMEX launched the Brent crude oil futures contract in Dublin last November, 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 towards electronic trading, proved unpopular with many London traders, especially those dealing on their own account.
They preferred the "open outcry" trading method, which requires buyers and sellers, gathered in a central location, to cry out bids and offers to each other.
But although the exchange offered attractive incentives to traders to encourage them to move to Dublin to trade, most wanted NYMEX to locate in their home base of London.
Despite a promising start, volumes in Dublin failed to live up to expectations and have slowed to a trickle since Christmas. NYMEX had initially targeted volume of around 10,000 contracts per day but the daily average over the last three months has been just under 3,000.
The decision to choose Dublin for the launch of the Brent contract, the first time NYMEX had opened a new trading floor outside its New York base, was largely due to the speed with which it could get regulatory approval here.
But many market observers believed that oil trading in Dublin would prove short-lived, a view that has been borne out, with the business now set to move back to London, the oil industry's European base, as soon as approval is secured.
