NYBOT-NYMEX DUEL OVER TRADING FLOOR

The New York Board of Trade may be forced to shutter its trading floor following last week’s surprise decision by the neighboring New York Mercantile Exchange to begin trading its most lucrative products.

Nybot currently leases a 13,000 square foot trading floor and 45,000 square feet of office space from the Nymex in the World Financial Center.

A provision in the lease prevents Nybot from trading products that compete with the Nymex if it gets acquired.

That provision will kick in once The Intercontinental Exchange, an electronic energy market and Nymex’s chief competitor, closes its $1.3 billion deal to buy the Nybot next year.

The deal was originally crafted to enable Nybot’s key products, including coffee, cocoa and sugar, to be traded on ICE’s electronic platform, but could force Nybot to break its lease and move out, according to insiders.

The already-tense relationship between Nybot and Nymex traders is expected to get even more heated in the coming months as the two exchanges fight over the provision in the lease agreement.

There is “no room for competition in our own building,” said one Nymex member on the Web site Agoros.com. “If ICE had it their way our $125 stock price would be 0. . . how could anybody even entertain leasing them space in our building?”

Closing down the Nybot floor will also heighten fears among traders that ICE plans to do away with floor-based trading of Nybot products in favor of its electronic system.

Some trading firms on the Nybot floor are already cutting back staff in anticipation of lower volumes once electronic trading starts, Nybot insiders said.

“One way or another, their floor is going to be closed down by ICE. So Nymex doesn’t care much if they stay or go,” said one Nymex member.

Nymex is said to receive roughly $5 million a year in rent from Nybot but some Nymex members would rather not have their biggest competitor in the same building.

“ICE will nit pick us on every building issue they can conjure up,” said one Nymex member. “It is possible that we will be spending more on legal fees then the rental income.”

A spokesman for Nybot declined to comment.

Prudential analyst Rob Rutschow suggested last week that Nybot could move its trading floor to the New York Stock Exchange, which recently closed part of its trading floor and boosted e-trading.

Nybot chief Harry Falk said last week that Nymex’s move to begin trading its products was a deliberate attempt to interfere with the ICE merger. Nymex’s new products are “an obvious attempt to prevent a change in control under Nybot’s valid lease,” Falk said.