Edgar Filing: NYMEX HOLDINGS INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

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NYMEX HOLDINGS, INC.

DELAWARE 333-30332 13-4098266
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (I.R.S. ID.)

ONE NORTH END AVENUE
WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10282-1101
(212) 299-2000

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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK

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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes [X] No [ ]

The number of shares of NYMEX Holdings, Inc. capital stock outstanding as
of February 27, 2004 was 816. The aggregate market value of NYMEX Holdings, Inc.
capital stock held by stockholders of NYMEX Holdings, Inc., as of February 27,
2004 was $1,295,400,000 based upon the average of the bid and ask price for a
NYMEX Holdings, Inc. share as of February 27, 2004.

DOCUMENTS OF WHICH PORTIONS PARTS OF FORM 10-K INTO WHICH PORTION
ARE INCORPORATED BY REFERENCE OF DOCUMENTS ARE INCORPORATED
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Proxy Statement for NYMEX Holdings' March 16, 2004 III
Annual Meeting of Stockholders

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TABLE OF CONTENTS

PART I
ITEM 1. Business.................................................... 2
ITEM 2. Properties.................................................. 15
ITEM 3. Legal Proceedings........................................... 15
ITEM 4. Submission of Matters to a Vote of Security Holders......... 16

PART II
ITEM 5......... Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 17
ITEM 6. Selected Financial Data..................................... 17
ITEM 7......... Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 19
ITEM 7A........ Quantitative and Qualitative Disclosures About Market
Risk........................................................ 39
ITEM 8. Financial Statements and Supplementary Data................. 40
ITEM 9......... Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 40
ITEM 9A. Controls and Procedures..................................... 41

PART III
ITEM 10. Directors and Executive Officers of the Registrant.......... 42
ITEM 11. Executive Compensation...................................... 45
ITEM 12........ Security Ownership of Certain Beneficial Owners and
Management.................................................. 45
ITEM 13. Certain Business Relationships and Related Transactions..... 45
ITEM 14. Principal Accounting Fees and Services...................... 46

PART IV
ITEM 15........ Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 47
Signatures.................................................. 49
Index to Financial Information.............................. F-1
Management's Responsibility for Financial Statements........ F-2
Independent Auditors' Reports............................... F-3

PART I

ITEM 1. BUSINESS.

Forward-Looking Information -- Safe Harbor Statement

Certain information in this report (other than historical data and
information) constitutes forward-looking statements regarding events and trends
that may affect the Company's future operating results and financial position.
The words "estimate," "expect," "intend" and "project," as well as other words
or expressions of similar meaning, are intended to identify forward-looking
statements. Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this annual report on Form 10-K.
These statements are based on current expectations. Assumptions are inherently
uncertain and are subject to risks that should be viewed with caution. Actual
results and experience may differ materially from forward-looking statements as
a result of many factors, including: changes in general economic and industry
conditions in various markets in which the Company's contracts are traded,
increased competitive activity, fluctuations in prices of the underlying
commodities as well as for trading floor administrative expenses related to
trading and clearing contracts, the ability to control costs and expenses,
changes to legislation or regulations, protection and validity of our
intellectual property rights and rights licensed from others, and other
unanticipated events and conditions. It is not possible to foresee or identify
all such factors. The Company assumes no obligation to update publicly any
forward-looking statements.

Code of Ethics

The Company has adopted a code of ethics for its principal executive
officer and senior financial officers. A copy of the Company's code of ethics is
attached to this Annual Report on Form 10-K as Exhibit 14 and is also available
on the Company's website at www.nymex.com. The Company intends to post on its
website material changes, or waivers from, its code of ethics, if any, within
two days of any such event. As of March 4, 2004, there were no such changes or
waivers.

Overview

Throughout this document NYMEX Holdings, Inc., will be referred to as
"NYMEX Holdings" and, together with its subsidiaries, as the "Company." The two
principal operating subsidiaries of NYMEX Holdings are New York Mercantile
Exchange, Inc., ("NYMEX Exchange" or "NYMEX Division"), and Commodity Exchange
Inc. ("COMEX" or "COMEX Division"), which is a wholly-owned subsidiary of NYMEX
Exchange. Where appropriate, each division will be discussed separately and
collectively will be discussed as the "Exchange."

Since its founding 132 years ago, the Exchange has evolved into a major
provider of financial services to the energy and metals industries. A core
component of the business is the revenue derived from the Exchange's trading
facilities and from providing clearing and settlement services through its
clearinghouse to a wide range of participants in these industries. A significant
amount of revenue is also derived from the sale of market data. Based upon our
2003 volume of approximately 139 million contracts transacted and/or cleared on
the Exchange, the Exchange is the largest physical commodity based futures
exchange in the world and the third largest futures exchange in the United
States. NYMEX Exchange is the largest exchange in the world for the trading of
energy futures and options contracts, including contracts for crude oil,
unleaded gasoline, heating oil and natural gas and is the largest exchange in
North America for the trading of platinum group metals contracts. COMEX is the
largest marketplace for gold and silver futures and options contracts, and is
the largest exchange in North America for futures and options contracts for
copper and aluminum. Participants in the Exchange's markets include a wide
variety of customers involved in the production, consumption and trading of
energy and metals products. Market participants use the Exchange for both
hedging and speculative purposes.

The Exchange exists principally to provide facilities to buy, sell and
clear commodities for future delivery under rules intended to protect the
interests of all market participants. The Exchange itself does not own any
commodities, trade futures and options contracts for its own account or
otherwise engage in market activities.

The Exchange provides the physical facilities necessary to conduct an open
outcry auction market and electronic trading systems and systems for the
matching and clearing of all trades executed on the Exchange. Futures and
options markets, such as the Exchange, facilitate price discovery and provide
financial risk management instruments to a broad array of market participants
including commercial entities that produce, consume, trade or have other
interests in, underlying commodities. The Exchange believes that market
participants choose to trade on centralized markets such as the Exchange because
of the liquidity those markets help to provide and because those markets perform
an important price discovery function by providing the prices at which each
trade occurs. The liquidity that the Exchange and other centralized markets
offer is achieved in large part because the traded contracts have standardized
terms and the Exchange's clearinghouse helps mitigate counterparty performance
risk.

History

NYMEX Exchange's predecessor, the New York Mercantile Exchange, was
established in 1872 as the Butter and Cheese Exchange of New York to provide an
organized forum for the trading of dairy products. Within a few years, the egg
trade became an important part of the business and the name of the Exchange was
changed to the Butter, Cheese and Egg Exchange of the City of New York. In order
to attract traders of groceries, dried fruits, canned goods and poultry, the
name was changed to New York Mercantile Exchange in 1882.

Energy futures trading was first established with the introduction of the
heating oil contract in 1978, the world's first successful energy futures
contract. Between 1981 and 1996, contracts followed for gasoline, crude oil,
natural gas, propane, and electricity. The platinum futures contract is the
world's longest continuously traded precious metals futures contract and was the
first industrial commodity traded on the NYMEX Division. It is considered one of
the world's most valuable industrial metals. Palladium futures, the only
domestically exchange-traded instrument for that metal, were launched in 1968.

COMEX was founded in 1933 from the combination of four futures markets; the
National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk
Exchange, and the New York Hide Exchange. It initially traded six commodities:
copper, hides, rubber, silk, silver and tin. In August 1994, with the
acquisition of COMEX, the Exchange enhanced its status as the world's largest
physical commodity futures exchange.

On November 17, 2000, the New York Mercantile Exchange converted from a New
York not-for-profit membership association into a Delaware for-profit stock
corporation and became a subsidiary of NYMEX Holdings, Inc., a Delaware
corporation, as a result of a merger. In the transaction, each NYMEX Division
membership was converted into one Class A membership in NYMEX Exchange and one
share of common stock of NYMEX Holdings. NYMEX Holdings holds the sole
outstanding Class B membership in NYMEX Exchange.

The Company's principal offices are located at One North End Avenue, World
Financial Center, New York, NY 10282. Its telephone number is (212) 299-2000.

Strategy

In general, the more liquidity a commodities market offers, the more
attractive it is to market users. Conversely, if liquidity declines, a market
becomes less attractive. Market participants generally view liquidity as having
two elements -- trading volume and open interest. The Company believes that its
continued and future success will be based upon its ability to strengthen its
existing assets, including the Company's product line and clearinghouse, and to
provide a technological infrastructure that offers efficient technology for
market participants which can accommodate future growth of the Company. In doing
so, the Company believes that it will position itself to ensure its ability to
offer trading volume and open interest and thereby ensure continued liquidity to
market participants. During the past year, the Company has continued these
efforts and has undertaken several initiatives that it believes make significant
strides in attempting to achieve these goals.

Product Line: The Company has had continued success in maintaining its
position as a premier marketplace for the trading of energy and metals futures
and options contracts. The underlying marketplace, however, particularly in the
energy world, has undergone fundamental changes after the collapse of Enron and
the continuing financial weakness in the merchant energy sector.

In order to respond to these fundamental shifts, the Company has focused on
developing new products that provide an array of relevant products and risk
management tools to the energy industry. In 2002, the Company launched an
initiative that was originally called the over-the-counter ("OTC") clearing
initiative, which is now provided as the service entitled NYMEX ClearPort(SM)
Clearing. This initiative, among other things, was intended to alleviate some of
the credit issues in the marketplace by use of the clearinghouse and to offer
market participants the advantages of reduced costs by offsetting positions. In
2002, the Company introduced 57 products for clearing only and for clearing and
trading, including electricity, natural gas basis and crude oil swaps futures,
based on commonly traded OTC instruments. In 2003, additional products were
added to the system, and as of December 12, 2003, open interest in the NYMEX
ClearPort(SM) slate of products exceeded one million contracts.

The Company also believes that there are strategic benefits to be gained by
providing ancillary services to energy and metals industry participants in order
to provide a full complement of services to these industries. In 2002, the
Company commenced a service called NYMEX ClearPort(SM) Confirmations, a
confirmation service designed to be used by OTC market participants. While the
Company discontinued this service in 2003, the Company continues to review other
possible ancillary services that may be provided to the energy and metals
industries and anticipates developing and providing additional services.

Product Reputation and Integrity: As noted above, the Company believes that
one of the keys to its future success relates to its financial strength and the
strength of its clearinghouse. In 2003, the Company took certain steps to
strengthen its clearing mechanism. In May 2003, the Company eliminated separate
guaranty funds for the NYMEX and COMEX Divisions and created a single guaranty
fund along with rules that increase the responsibility of clearing members for a
default on either division. In addition, as an additional safeguard, the Company
procured default insurance to cover financial loss beyond its available guaranty
fund resources. Finally, the Company is exploring the possibility of
implementing a liquidity facility to increase the Company's flexibility with
respect to short-term availability of funds in the event of a clearing member
default.

As part of these efforts, the Company sought and received a credit rating
from Standard & Poor's Ratings Services which resulted in a long term AA+/short
term A-1+ counterparty credit rating.

Product Distribution: As part of its ongoing strategy, the Company also
undertook several measures that are intended to expand the customer base of the
marketplace by broadening access to its markets. The Company believes that
certain ways in which the product base can be enriched is to provide for a
broader distribution network for products as well as providing products which
attract an expanded class of investors other than those who have traditionally
used the Company's markets.

The Company has also looked towards use of its electronic trading systems
to expand customer access to its markets. The Company continued to expand
customer access to its NYMEX ACCESS(R) electronic trading system in accordance
with the Company's decision to eliminate previous restrictions on users of the
system. During the year 2003, the number of users on the system increased to
approximately 1,800. In addition, as further discussed below, the Company phased
in the use of a new trade matching system that is designed to facilitate ease of
access into the markets by permitting customer proprietary or third-party
software to be connected to the Company's systems by means of an application
programming interface ("API").

The Company has also endeavored to implement this strategy by means of
certain domestic and international alliances. For example, in 2002, the Company
commenced an alliance with the Chicago Mercantile Exchange ("CME") and offered
newly created smaller sized versions of NYMEX Exchange crude oil and natural gas
futures contracts ("e-miNY(SM)") for trading on the CME's GLOBEX(R) electronic
trading platform and clearing through the Company's clearinghouse. This product
is intended to provide not only another risk management tool to energy
participants, but it is hoped that such a product will attract more

public non-commercial customers to the Company's marketplace while leveraging
the GLOBEX(R) system's distribution system.

The Company also attempts to internationalize its customer base, in large
part by undertaking a marketing effort to introduce risk management analysis and
techniques to potential customers abroad. Toward achieving that end, the Company
originally placed NYMEX ACCESS(R) terminals (now replaced by internet-based
NYMEX ACCESS(R)) in various physical commodity trading centers, including the
United Kingdom and in Australia (through a linkage with the Sydney Futures
Exchange). The Company continues to implement this strategy by ensuring that its
new initiatives, including NYMEX ClearPort(SM), have similar international
distribution and has received approval for that system in additional
jurisdictions including, among other locations, Switzerland and Hong Kong.

Technology: The Company has both enhanced and improved its technology to
facilitate increased efficiency and to enhance its competitive posture. In 2003,
the Company has developed and continued to refine trade-matching technology that
it believes can provide the flexibility required to support these expanded
business needs. In the first quarter of 2003, the Company launched the NYMEX
ClearPort(SM) Trading system. The Company continues to upgrade the system to
support the specific functional needs of its customers. At this point, assuming
that the system continues to provide the anticipated reliability, functionality,
flexibility and scalability, it is anticipated that NYMEX ClearPort(SM) Trading
will over time become the mechanism through which all electronic trading on the
Exchange will be conducted.

The Company has also taken a number of steps with respect to its
technological infrastructure to improve the operational efficiency of the
Company and its customers. These steps have included measures intended to create
a common hardware and operating environment for the Company's systems. Thus, the
Company hopes to combine its expertise and leadership as an exchange with
state-of-the-art technology in order to provide users with a comprehensive
system in commodity risk management.

Principal Products

NYMEX Division

NYMEX Exchange is the leading commodity exchange for trading energy futures
and options contracts, including contracts for crude oil, heating oil, unleaded
gasoline, propane, electricity and natural gas and is a leading exchange for
trading platinum group metals futures and options, including contracts for
platinum and palladium.

The following tables set forth the annual volumes and year end open
interest for futures and options products traded and cleared on the NYMEX
Division. Volumes are expressed as "round turn" trades, which are matched buys
and sells of the underlying contracts. Open interest represents the number of
contracts at December 31, for which clearing members and their customers are
obligated to the Exchange and are required to make or take future delivery of
the physical commodity (or in certain cases be cash settled), or close out the
position with an offsetting sale or purchase prior to contract expiration.
Options open interest represents unexpired, unexercised option contracts.

NYMEX DIVISION CONTRACTS TRADED AND CLEARED
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)

2003 2002 2001 2000 1999
----------------- ----------------- ----------------- ----------------- -----------------
FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS FUTURES OPTIONS
------- ------- ------- ------- ------- ------- ------- ------- ------- -------

Light sweet crude
oil............... 45,437 10,237 45,679 11,461 37,531 7,726 36,883 7,460 37,860 8,162
Henry Hub natural
gas............... 19,037 8,742 24,358 10,966 16,468 5,974 17,875 5,336 19,165 3,849
N.Y. heating oil.... 11,582 669 10,695 602 9,264 705 9,631 1,386 9,201 696
N.Y. Harbor unleaded
gasoline.......... 11,172 616 10,980 722 9,224 1,040 8,645 1,012 8,701 600
Other............... 916 251 557 117 294 31 427 66 842 114
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total............... 88,144 20,515 92,269 23,868 72,781 15,476 73,461 15,260 75,769 13,421
====== ====== ====== ====== ====== ====== ====== ====== ====== ======

NYMEX DIVISION CONTRACTS OPEN INTEREST
AT DECEMBER 31,
(IN THOUSANDS)

Light sweet crude
oil............... 600 733 581 1,167 419 692 408 533 502 557
Henry Hub natural
gas............... 318 740 380 987 404 766 353 514 247 370
N.Y. heating oil.... 138 56 166 71 150 66 125 148 135 58
N.Y. Harbor unleaded
gasoline.......... 108 21 115 48 121 35 90 39 90 46
Other............... 34 20 12 17 9 2 11 6 21 7
----- ----- ----- ----- ----- ----- --- ----- --- -----
Total............... 1,198 1,570 1,254 2,290 1,103 1,561 987 1,240 995 1,038
===== ===== ===== ===== ===== ===== === ===== === =====

COMEX Division

The COMEX Division provides futures and options trading of precious metals
including gold and silver, as well as base metals including copper and aluminum
contracts. The Company's gold and silver futures and options contracts are the
world's principal exchange-traded instruments for these commodities.

The following tables set forth annual volumes and year-end open interest
for futures and options contracts traded and cleared on the COMEX Division.

COMEX DIVISION CONTRACTS TRADED AND CLEARED
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)

Gold................ 12,236 4,310 9,018 1,949 6,785 1,975 6,643 2,084 9,576 2,816
Silver.............. 4,111 560 3,136 535 2,569 483 3,117 579 4,158 726
High grade copper... 3,089 47 2,807 33 2,857 51 2,778 65 2,853 161
Other............... 107 3 74 -- 48 -- 88 -- 59 --
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total............... 19,543 4,920 15,035 2,517 12,259 2,509 12,626 2,728 16,646 3,703
====== ===== ====== ===== ====== ===== ====== ===== ====== =====

COMEX DIVISION CONTRACTS OPEN INTEREST
AT DECEMBER 31,
(IN THOUSANDS)

Gold................ 279 621 207 213 115 202 111 303 156 630
Silver.............. 102 61 81 48 63 69 72 62 76 64
High grade copper... 88 11 80 3 74 11 70 5 72 12
Other............... 9 -- 9 -- 3 -- 3 -- 2 --
--- --- --- --- --- --- --- --- --- ---
Total............... 478 693 377 264 255 282 256 370 306 706
=== === === === === === === === === ===

NYMEX ClearPort(SM) Clearing

NYMEX ClearPort(SM) Clearing provides for the clearing, through the
Company's clearinghouse, of off-exchange futures trades executed in the OTC
market. The following tables set forth futures contract clearing volumes and
year end open interest for NYMEX ClearPort(SM) Clearing since its launch in the
second quarter of 2002.

NYMEX CLEARPORT(SM) CLEARING CONTRACTS CLEARED
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)

FUTURES
------------
2003 2002
----- ----

Natural gas................................................. 5,641 527
Electricity................................................. 255 7
Petroleum products.......................................... 106 --
Coal........................................................ 2 --
----- ---
Total....................................................... 6,004 534
===== ===

NYMEX CLEARPORT(SM) CLEARING OPEN INTEREST
AT DECEMBER 31,
(IN THOUSANDS)

FUTURES
------------
2003 2002
----- ----

Natural gas................................................. 956 287
Electricity................................................. 41 5
Petroleum products.......................................... 30 --
Coal........................................................ 1 --
----- ---
Total....................................................... 1,028 292
===== ===

The Company is constantly seeking ways to provide additional products and
innovative risk management tools to the marketplace and to expand its franchise
in the energy and metals marketplace.

Product Distribution

The Company provides the physical facilities necessary to conduct an open
outcry auction market, electronic trading systems and systems for the matching
and clearing of all trades executed on the Exchange.

Open Outcry Trading

Open outcry trading takes place at the Company's state-of-the-art facility
located at One North End Avenue. Trading is conducted on trading floors, one for
each division of the Exchange. Open outcry trading represented approximately 92%
of total futures and options contract volume executed and/or cleared on the
Exchange in 2003.

Electronic Trading and Clearing

The Company provides innovative, state-of-the-art trading systems and
facilities to enable it to serve efficiently its customers. To support its
expanding international business and product base, the Company has made sizable
investments to create and to maintain a global electronic trading platform.

Electronic Trading -- NYMEX ACCESS(R)

The Exchange launched its NYMEX ACCESS(R) electronic trading system in June
1993. NYMEX ACCESS(R) permits the trading of futures contracts on crude oil,
heating oil, unleaded gasoline, natural gas, platinum, gold, silver, copper,
aluminum, propane and palladium. The system was originally active solely when
NYMEX Exchange's trading floor was closed; however, the Exchange expanded the
use of the system to enable both day and nighttime trading of certain products.
As of December 31, 2003, approximately 1,800 users were enabled to trade over
the system.

Trading on NYMEX ACCESS(R) achieved a record volume level during 2003 of
approximately 5.8 million contracts, which accounted for 4% of the Exchange's
total trading and clearing volume. Volume on NYMEX ACCESS(R) has rapidly grown,
increasing 20% in 2003, 88% in 2002, and 25% in 2001. A new upgraded version of
NYMEX ACCESS(R), using a browser-based interface, was launched in September
2001. The new system retains the transaction matching speed of its predecessor
while expanding capacity, and is less costly to operate than the previous
version of the system as it is delivered through the internet and no longer
requires dedicated telecommunications equipment. Due to the lessening of these
constraints, the new version of the system has enabled easier access by a
broader customer base.

Electronic Trading and Trade Clearing -- NYMEX ClearPort(SM)

In 2002, the Company developed the NYMEX ClearPort(SM) initiative, which is
designed to provide an array of services beyond those provided by open outcry
trading. There are two major components of this initiative at this time. NYMEX
ClearPort(SM) Trading provides a trade execution system for certain energy
futures products which are based on commonly-traded OTC instruments. The system
was launched in January 2003. The Company anticipates that, assuming the system
provides the anticipated reliability, flexibility and scalability, NYMEX
ClearPort(SM) Trading will become the mechanism through which all electronic
trading on the Exchange will be conducted. NYMEX ClearPort(SM) Clearing is the
mechanism by which individually negotiated off-exchange trades are submitted to
the Exchange for clearing for specified products. This includes clearing for the
products that are part of the OTC clearing initiative launched in May 2002 as
well as the interface used to submit Exchange of Futures for Physical ("EFP")
and Exchange of Futures for Swaps ("EFS") transactions for energy futures traded
as part of NYMEX ClearPort(SM) Trading and a limited number of NYMEX ACCESS(R)
products. During 2003, NYMEX ClearPort(SM) Clearing volume represented
approximately 4% of total contracts traded and cleared.

Alliances

Chicago Mercantile Exchange: In May 2002, The Company executed an agreement
with the CME to offer newly created smaller sized versions of crude oil and
natural gas futures contracts ("e-miNY(SM)") for trading on the CME's GLOBEX(R)
electronic trading platform and clearing through the Company's clearinghouse.
The Exchange has developed a smaller sized version of the platinum futures
contract and anticipates launching these products in 2004. The agreement also
provides for the possibility of development of additional metals and
energy-based products. These products are intended to provide not only
additional risk management tools to market participants with the anticipation
that such products will attract more public non-

commercial customers to the Company's marketplace while leveraging the GLOBEX(R)
system's distribution system. In addition, the Company and CME offer a
cross-margining program based upon the Company's energy products and the CME's
Goldman Sachs Commodity Index futures product.

Sydney Futures Exchange Limited: In 1995, the Company entered into an
agreement with the Sydney Futures Exchange Limited ("SFE") whereby SFE members
were provided with a link to NYMEX Division products on NYMEX ACCESS(R) through
the SFE's SYCOM(R) after hours electronic trading system (now replaced by
internet-based NYMEX ACCESS(R)). This linkage was expanded to include certain
COMEX Division products in 1996. Pursuant to recent changes in Australian law,
NYMEX is required to obtain an Australian Market Operators license by March
2004. NYMEX is in the process of pursuing such a license. In the event NYMEX is
unable to receive a license or a temporary exemption, the linkage shall cease.

Singapore Exchange Derivatives Trading Limited: In 1999, the Company
entered into an agreement with the Singapore Exchange Derivatives Trading
Limited for the placement of NYMEX ACCESS(R) terminals in Singapore, one of
Asia's primary oil trading centers. This linkage received regulatory approval in
2000. The Company is currently seeking to modify its arrangement in Singapore to
include the internet-based NYMEX ACCESS(R).

Tokyo Commodity Exchange: In 2003, the Company entered into a memorandum of
understanding with the Tokyo Commodity Exchange to explore mutual areas of
cooperation, including the cross-listing of contracts on each others electronic
trading systems and related assistance in procuring approval from the relevant
regulators. The Company anticipates that the arrangement will be finalized in
the first quarter of 2004.

Clearinghouse Function

The Exchange serves a clearinghouse function, standing as a financial
intermediary on every open futures and option transaction cleared. Specifically,
through its clearinghouses, the Exchange guarantees financial performance of
obligations owed to buyers and sellers. As such, in the case of a customer or
clearing member financial default, to the extent that funds are not otherwise
available to the Exchange to satisfy the obligations under the applicable
contract, the Exchange may be required to perform the financial obligations.

NYMEX Division and COMEX Division contracts are cleared through the
clearinghouse department within NYMEX Exchange. Prior to May 2003, COMEX
Division contracts were cleared through a wholly-owned subsidiary of COMEX, the
COMEX Clearing Association, Inc. ("CCA"). In May 2003, the COMEX Division and
NYMEX Division clearing operations were consolidated into the NYMEX Division
clearinghouse. This consolidation included the transferring of the CCA guaranty
fund into a single consolidated Exchange guaranty fund and all of CCA's rights,
duties and responsibilities were transferred to NYMEX Exchange.

As such, NYMEX Exchange provides the operational infrastructure to allow
position matching, reporting and margining for each of NYMEX Division's and
COMEX Division's contracts. This structure permits parties to trade with one
another without individual credit determinations or counterparty credit risk,
allows for the daily flow of marked-to-market variation margin payments and
allows the Exchange to look to the financial strength of its clearing members.

As a safeguard to ensure proper settlement of contracts, each clearing
member is required to maintain a security deposit, in the form of cash or U.S.
treasury securities, ranging from $100,000 to $2.0 million per division,
depending upon such clearing member's capital, in a fund known as a guaranty
fund. The guaranty fund contained approximately $154.6 million in cash and U.S.
treasury securities as of December 31, 2003. The guaranty fund is controlled by
NYMEX and may be used to cover the financial defaults of a clearing member on
either or both divisions; these amounts on deposit in the guaranty funds,
however, are not the property of the Company and are not available to pay debt
service. During 2003, the Company obtained a $100 million default insurance
policy. This insurance coverage is available to the Company in the event that a
default in excess of $130 million occurs which depletes the available guaranty
fund and defaulting member clearing deposits.

The Exchange, as a self-regulatory organization, has instituted detailed
risk-management policies and procedures to guard against default risk with
respect to contracts traded on the Exchange. In order to guard against default
risk with respect to contracts traded on the Exchange, NYMEX Exchange has
instituted detailed risk management policies and procedures. In order to manage
the risk of financial non-performance, the Exchange (1) has established minimum
capital requirements for clearing members; (2) limits the number of net open
contracts that can be held by any clearing member, based upon that clearing
member's capital; (3) requires clearing members to post original margin
collateral for all open positions, and to collect original margin from their
customers; (4) pays and collects variation margin on a marked-to-market basis at
least twice daily; (5) requires clearing members to collect variation margin
from their customers; (6) requires deposits to the guaranty fund from clearing
members which would be available to cover financial non-performance; and (7) has
broad assessment authority to recoup financial losses. The Exchange also has
extensive surveillance and compliance operations and procedures to monitor and
enforce compliance with rules pertaining to the trading, position sizes,
delivery obligations and financial condition of members.

As part of the Exchange's powers and procedures designed to backstop
contract obligations in the event of a default, the Exchange may levy
assessments on any of its clearing members if there are insufficient funds
available to cover a deficit. The maximum assessment on each clearing member is
the lesser of $30 million and 40% of such clearing member's capital.

Despite the Exchange's authority to levy assessments or impose fees, there
can be no assurance that the relevant members will have the financial resources
available to pay, or will not choose to be expelled from membership rather than
pay, any dues, fees or assessments. The Exchange believes that assessment
liabilities of a member arising prior to expulsion are contractual in nature
and, accordingly, survive expulsion. In addition, the Exchange would have
recourse to such member and the proceeds from the Exchange's sale of such
member's seat to apply towards any outstanding obligations to the Exchange of
such member.

Moreover, despite the risk mitigation techniques adopted by, and the other
powers and procedures implemented by the Exchange, which are designed to, among
other things, minimize the potential risks associated with the occurrence of
contract defaults on the Exchange, there can be no assurance that these powers
and procedures will prevent contract defaults or will otherwise function to
preserve the liquidity of the Exchange.

The Exchange conducts clearing through its Clearing 21(R) system. This
system, a highly flexible clearing system, developed jointly with the Chicago
Mercantile Exchange, was rolled out in 1999 and is expected to support any
anticipated growth in volume or business expansion for the subsequent five to
ten years. The Clearing 21(R) system was upgraded in the fall of 2001 to permit
clearing member access via the internet. as well as to accommodate an enhanced
product base, including the clearing of OTC contracts. The system enables the
Exchange to perform functions relating to: banking, settlement, asset
management, delivery management, position management and margins.

The Exchange has an excellent risk management track record. No significant
clearing member default has occurred since 1985. The 1985 default was at the CCA
prior to the COMEX acquisition, and was promptly resolved. NYMEX Exchange's
clearing function enables the Company to guarantee the financial performance of
all contracts traded and/or cleared on NYMEX Exchange or COMEX Division.

Market Data

The Company sells proprietary real-time and delayed market data relating to
prices of contracts traded on the Exchange to third parties. The data is
distributed to customers through information vendors. Fees from customers are
collected by these vendors and remitted to the Exchange. These information
vendors include Reuters, Bloomberg, Thompson and DTN, who distribute the data to
sub-vendors and subscribers that receive real-time and delayed data. Market data
fees contributed 17%, 18%, and 24% of the Company's total consolidated revenues
for the years ended December 31, 2003, 2002 and 2001, respectively.

Competitive Environment

According to information provided by the Futures Industry Association
("FIA") for the year 2003, the Exchange is the largest physical commodity-based
futures exchange in the world and the third largest futures exchange in the
United States. The marketplace for the Exchange's contracts exists both in the
physical format of open outcry ring trading on the trading floor facilities, and
electronically through NYMEX ACCESS(R) and the NYMEX ClearPort(SM) system, which
was introduced in January 2003.

The Exchange encounters competition in all aspects of its business and
competes directly with other exchanges, both domestic and foreign, and OTC
entities, some having substantially greater capital and resources and offering a
wider range of products and services than does NYMEX. The Exchange believes that
the principal factors affecting competition involve the integrity of the
marketplace provided by the Exchange, the relative prices of services and
products it offers, its substantial liquidity base, its worldwide brand
recognition and the quality of its clearing and execution technology and
services.

The Company faces the threat of competition from the activities of foreign
and emerging exchanges or unregulated exchange-equivalents in the United States.
Exchanges designated as "contract markets" or "derivatives transaction execution
facilities" can compete with the Exchange in offering market trading of futures
and options contracts in both of these formats. In this regard, the Commodity
Futures Modernization Act ("CFMA"), enacted in 2000, has created additional
opportunities for new competitors to provide trading facilities resulting in an
expansion in the number of designated contract markets since the implementation
of the CFMA. According to the CFTC, seven new contract market designations have
been approved since the implementation of the CFMA. For example, in February
2004, the CFTC approved the designation of the U.S. Futures Exchange, L.L.C., a
subsidiary of Eurex Frankfurt AG which operates Eurex Deutschland, a large
futures exchange based in Frankfurt, Germany. While this exchange does not
directly compete with the Company, this exchange as well as any other new
entrant could potentially compete with the Company's markets.

Moreover, the CFMA increased the ability of competitors to offer
unregulated competing products that are financially-equivalent to futures
contracts. For instance, the IntercontinentalExchange, Inc., an electronic
trading system for various OTC energy products, was created by several large
merchant energy and energy companies and currently operates as an "exempt
commercial market" under the CFMA. This company is engaged in the trading of
several energy instruments which are financially equivalent to those traded on
the Exchange. OTC trading of contracts similar to those traded and/or cleared on
the Exchange, such as swaps, forward contracts and NYMEX "look-alike" contracts,
in which parties directly negotiate the terms of their contracts, represents a
significant source of potential competition for the Exchange and could be a
significant factor affecting the Exchange's trading volumes and operating
revenues if market participants perceive OTC products and exchange-traded
futures and options as competing alternatives as opposed to complementary risk
management tools.

The CFMA also expanded the ability of companies to engage in the business
of clearing OTC instruments, which previously was not expressly permitted by
statute. One of the advantages of a regulated cleared futures instrument versus
an OTC instrument is that the existence of a clearinghouse mitigates potential
counterparty credit risk in the OTC markets. As such, to the extent that
companies are able to enter the business of the clearing of OTC instruments,
this may represent a source of competition to the Exchange and could be a
significant factor affecting the Exchange's trading volumes and operating
revenues. The NYMEX ClearPort(SM) Clearing initiative is the Exchange's effort
to enter into this type of business. There are other companies, such as the
Guaranty Clearing Corporation, a subsidiary of the Clearing Corporation
(formerly the Board of Trade Clearing Corporation), and EnergyClear, which have
also commenced operations. The London Clearing House (now known as LCH.Clearnet
Limited) has also been registered as a Designated Clearing Organization with the
CFTC and has established a clearing arrangement in both the U.S. and the U.K.
with the IntercontinentalExchange, Inc.

Volume on foreign futures and options exchanges is growing as the benefits
of risk management through futures and options trading become more appreciated
throughout the world and risk management techniques are adopted to meet the
needs of local economies. This growing global awareness has not only aided the

growth of foreign exchanges but has, to a certain extent, also benefited NYMEX
as non-U.S. enterprises become NYMEX members and customers of other NYMEX
members. Under present competitive conditions, NYMEX believes that increasingly
liquid foreign markets generally have not taken material volume away from NYMEX
since volumes on NYMEX continue to grow. At present, the most active and fastest
growing futures and options products listed on foreign exchanges (e.g.,Korean
and European stock indices; Euro-based and Mexican fixed income products) have
not competed with the most active and fastest growing NYMEX products.
Nevertheless, such foreign futures and options exchanges may in fact have taken
some volume, and may in the future take volume, away from NYMEX.

In the past year, there has been significant consolidation in the provision
of clearing services. In 2003, the CME and the Chicago Board of Trade ("CBT")
announced a common clearing link whereby the CME would provide clearing and
settlement services for all CBT products. This linkage became fully operational
in January 2004. The CME has estimated that it would be clearing approximately
85% of all U.S. futures and futures option volume. In December 2003, the London
Clearing House and Clearnet, two significant European clearinghouses, completed
a merger to form the LCH.Clearnet Group. To the extent that other entities are
able to provide clearing on products which compete with the Company's products
and are able to provide benefits to market users from such consolidations, this
may represent a source of competition to the Exchange and could be a significant
factor affecting trading volumes and operating revenues.

The Exchange, like other commodity and financial exchanges, is directly
affected by such factors as national and international economic and political
conditions, broad trends in business and finance, legislation and regulations
affecting the national and international financial and business communities
(including taxes), currency values, the level and volatility of interest rates,
fluctuation in the volume, volatility and price levels in the commodities
markets and the perception of stability in the commodities and financial
markets. These and other factors can affect the Exchange's volume of trading and
the stability and liquidity of the commodities markets. A reduced volume of
commodity transactions and reduced market liquidity would result in lower
revenues for the Company from transaction and clearing fees. In periods of
reduced transactions, the Company's profitability would also likely be adversely
affected because certain of its expenses are relatively fixed.

Intellectual Property

The Company reviews on an ongoing basis the proprietary elements of its
business to determine what intellectual property protections are available for
these elements. The Company seeks to protect proprietary elements by relying
upon the protections afforded by trademark, service mark, copyright, patent and
other legal rights and remedies on both a domestic and an international scale.
In addition, some of our products are dependent upon licensing of these rights
from third parties. For instance, with respect to certain of the products traded
and/or cleared on the NYMEX ClearPort(SM) system, the Company has entered into
license agreements with Platts and Intelligence Press.

Business Continuity Planning

As with all other financial institutions, the Company continues to
strengthen and upgrade its disaster recovery facilities and capabilities. Some
of the steps taken by the Company to achieve this goal are as follows:

Regulatory

There currently is limited regulatory oversight or regulations imposed upon
exchanges with respect to business continuity planning or disaster recovery in
the futures industry. However, the Company looks to other regulatory bodies in
the equities and bond markets, and has evaluated the various proposals and white
papers submitted by industry and government agencies, as well as our own
industry for direction and best practices trends.

The Company continually looks to improve its system of business continuity
planning by making sure our partners, members and vendors have considered and
implemented business continuity planning as well. This

will enable the Company to maximize its ability to continue operations in the
face of adverse conditions. The Company intends to be a leader in developing
industry best practices for business continuity.

Systems and Facilities

In the past year, the Company's business continuity and disaster recovery
facilities have been consolidated into one facility for potential use during an
emergency in addition to the One North End Avenue facility. In April 2003, the
Company fully migrated into a new back-up trading facility located on a separate
power, water, and telecommunications grid. This alternative facility serves as a
back-up trading floor, is fully equipped for trading and has an emergency
operations center. This new back-up trading floor and data center is located
outside of the primary facility's transportation infrastructure. Linking the
data centers is high capacity fiber connectivity, allowing fully synchronous
communications between main and back-up systems. The Company has also instituted
on an annual basis a mock disaster scenario drill to test the efficiency of its
business continuity planning.

Planning

The Company's current plan provides enterprise-wide business continuity
planning that includes all business units, Exchange staff, and member staff. The
Company has purchased a complex planning and incident management system and
hired a Business Continuity professional to manage the Program. This planning
has moved forward enabling the Exchange to build a comprehensive Business
Continuity Plan. This planning includes conducting a full Risk Analysis and
Business Impact Analysis in order to identify areas of opportunity for
preventative measures as well as identify important business functions and
prioritize them accordingly. Additionally, the Company is establishing
relationships with local business community, law enforcement, and local and
regional government emergency agencies to help plan appropriately as well as to
provide information sources during a potential crisis.

Recent Developments

On February 10, 2004, the CFTC issued an order which enables the Exchange
to expand the products offered solely for clearing utilizing NYMEX ClearPort(SM)
Clearing to include certain options contracts. These options contracts include
the average price options on crude oil, heating oil, gasoline, and natural gas
which are currently traded via open outcry, as well as cash-settled, European
exercise versions of the Exchange's current energy options contracts. It is
anticipated that the Exchange will list these products in the first quarter of
2004.

On February 12, 2004, the Company announced that it established additional
retail customer protections supported by a commitment of at least $10 million
available at all times to promptly reimburse retail customers in the event that
their clearing member defaults as a result of a default by another customer and
margin funds from the retail customer's account are used to address the default.
Retail customers are defined as those who do not otherwise qualify as an
"eligible contract participant" under the requirements of the Commodity Exchange
Act, and are not floor traders or floor brokers on the Exchange or family
members of an Exchange floor trader or floor broker who maintain an account at
the same clearing firm.

On February 17, 2004, the Company announced that it had signed a Memorandum
of Understanding ("MOU") with the Dubai Development and Investment Authority
("DDIA") to jointly explore the development of the Dubai Mercantile Exchange
("DME"), the first commodity futures exchange in that region. The DME is
expected to be structured as a traditional exchange with a trading floor and
clearinghouse. The project envisions the establishment of a training institution
for empowering the region's talented youth to operate successfully in the modern
derivatives environment. The joint project will focus on the creation of new and
differentiated products, primarily revolving around commodities such as crude
oil, natural gas, electricity futures and metals such as aluminum and gold.

Financial Information about Segments

Financial information relating to NYMEX Holdings' business segments for
each of the three years for the period ended December 31, 2003, can be found in
the Notes to the Consolidated Financial Statements set forth in Item 15 of this
Annual Report on Form 10-K and is incorporated herein by reference.

Seasonal and Other Conditions

The Company believes that its business, in the aggregate, is not seasonal.
Certain contracts listed on the NYMEX Division, however, trade more heavily in
some seasons than in others. For example, heating oil futures and options trade
more heavily in the late fall and winter months, while higher trading in
unleaded gasoline futures and options usually occurs in the late spring and
summer months. Where possible, the Company manages its trading floor personnel
and expenses appropriately to address the seasonal variations in demand for
these contracts.

Working Capital Requirements

The Company believes its working capital of $99.6 million is adequate to
meet its current obligations. Although no assurances can be made, the Company
believes it has adequate cash flows from operations to fund future operations
and capital expenditure requirements for the next twelve months. In addition,
the Company has the ability, and may seek, to raise capital through the
issuances of stock in the private and public capital markets. For additional
information on working capital, see "Management's Discussion and Analysis of
Consolidated Results of Operations and Financial Condition -- Liquidity and
Capital Resources", in this Annual Report on Form 10-K.

Research and Development

The Company expends significant amounts each year on research for the
development of new and improvement of existing commodity contracts, as well as
on trading and clearing systems.

During the years ended December 31, 2003, 2002 and 2001, the Company
expended, directly or indirectly, $1.9 million, $9 million, and $13 million
respectively, on research, development and certain software engineering
activities relating to the design, development, improvement and modification of
new and existing contracts, as well as the formulation and design of new
processes, systems and improvements to existing ones. The Company anticipates
that it will continue to have research and development expenditures to maintain
its competitive position during 2004.

Effects of Environmental Regulations

The Company's services are not subject to environmental regulations.

Number of Employees

At December 31, 2003, NYMEX Holdings had 481 full-time employees. No
employees are covered by labor unions.

Foreign Sales

The Company derives foreign revenues from market data services, the total
of which is considered immaterial.

Available Information

The public may obtain further information about the Company from its
Internet address (http://www.nymex.com). Additionally, the Company makes its SEC
filings available free of charge and through its Internet address as soon as
reasonably practicable after the Company electronically files such material
with, or furnishes such material to, the SEC.

ITEM 2. PROPERTIES.

The Company's primary trading facilities and corporate headquarters are
located in a 16-story building in downtown Manhattan. This building, which is on
land leased from the Battery Park City Authority for a term expiring on June 17,
2069, is one of five office buildings in a complex known as the World Financial
Center. Construction of the 502,000 square foot building was completed in 1997.
As of December 31, 2003, the Company leases approximately 157,000 square feet at
this facility to 38 tenants who are member firms and non-member retail and other
tenants.

The Company's largest tenant is the Board of Trade of the City of New York,
Inc. ("NYBOT"), which entered into a lease with the Company in 2002. Under this
lease, which expires in 2013, NYBOT leases approximately 13,000 square feet of
the trading floor that is also occupied by COMEX Division, and approximately
45,000 square feet of office space. Rent commenced on various occupancy dates
during 2003.

The Company's permanent disaster recovery site is located at a facility
outside of New York City and operates on a different power grid than its
headquarters building. This site has fully operational trading floors to
facilitate both NYMEX Division and COMEX Division open outcry auction trading,
and houses a data center that is continuously connected to the Company's
headquarters to provide full systems and data redundancy. The Company leases the
space for this site. The lease, which is for 39,381 square feet, began in the
fourth quarter 2002 and expires in 2013. Prior to occupying this site, the
Company's back-up data center was located at a temporary recovery site in New
Jersey, which was occupied under a short-term lease that expired when the
Company completed the transition to its permanent recovery site in April 2003.

The Company had previously leased 17,000 square feet of space at 22
Cortlandt Street in New York, New York. This space had been used as the
Company's backup data center prior to the September 11, 2001 World Trade Center
terrorist attacks. The Company has not utilized this facility due to the damage
it sustained as a result of the terrorist attack. The term of this lease
originally expired in March 2010, and contained certain provisions for early
termination in the event the premises could not be occupied. The Company
believes that the inaccessibility of the premises subsequent to the World Trade
Center terrorist attack satisfied the conditions for early termination, and
notified the landlord to that effect. The Company is currently pursuing its
rights under these provisions.

The Company also leases office space in Houston, Texas and London, England,
where it conducts marketing activities.

The Company's management believes its properties are adequate and suitable
for its business as presently conducted and are adequately maintained for the
immediate future. The Company's facilities are effectively utilized for current
operations of all segments and suitable additional space is available to
accommodate expansion needs.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, the Company is involved in legal proceedings and
litigation arising in the ordinary course of business. Set forth below are
descriptions of legal proceedings and litigation to which the Company is a party
as of December 31, 2003. Although there can be no assurance as to the ultimate
outcome, the Company has denied, or believes it has a meritorious defense and
will deny liability, in all significant cases pending against it including the
matters described below, and intends to defend vigorously each such case. While
the ultimate result of the proceedings against the Company cannot be predicted
with certainty, it is the opinion of management, after consultation with outside
legal counsel, that the resolution of these matters, in excess of amounts
already recognized, will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.

The Company has been named as a defendant in the following legal actions:

Exchange was served with a summons and complaint on or about May 10, 1999. This
was a patent infringement case relating to the Company's electronic trading
system. This matter was settled on December 18, 2003.

Enrique Rivera and Edith Rivera v. New York Mercantile Exchange, Mark Kessloff,
Les Faison, Brian Bartichek and John Does "1-10." This action was pending in
New York State Supreme Court (Bronx County). NYMEX Exchange was served with the
summons and complaint on or about April 22, 1999. This was a case of alleged
ethnic discrimination case. Plaintiff sought an unspecified amount of
compensatory and punitive damages. The plaintiff filed a Note of Issue on or
about September 27, 2002. This matter was settled on January 27, 2004.

New York Mercantile Exchange v. GlobalView Software, Inc. On April 27, 2001,
NYMEX Exchange filed a breach of contract suit in New York State Supreme Court
(New York County) against GlobalView Software, Inc. ("GlobalView") NYMEX
Exchange sought to recover direct and consequential damages resulting from
GlobalView's breach of its contract with NYMEX Exchange regarding the front-end
development for enymex(SM). On or about June 18, 2001, GlobalView served its
answer and counterclaims in which it sought to recover amounts in excess of
$26,000,000 for alleged fees due and owing under the contract, as well as
consequential damages and other causes of action. This case was settled on May
6, 2003.

New York Mercantile Exchange v. IntercontinentalExchange, Inc. On November 20,
2002, NYMEX Exchange commenced an action in United States District Court for the
Southern District of New York against IntercontinentalExchange, Inc. ("ICE").
The amended complaint alleges claims for (a) copyright infringement by ICE
arising out of ICE's uses of certain NYMEX Exchange settlement prices; (b)
service mark infringement by reason of use by ICE of the service marks NYMEX and
NEW YORK MERCANTILE EXCHANGE, (c) violation of trademark anti-dilution statutes,
and (d) interference with contractual relationships. On January 6, 2003, ICE
served an Answer and Counterclaims, in which ICE alleges five counterclaims
against NYMEX Exchange as follows: (1) a claim for purported violation of
Section 2 of the Sherman Act, 15 U.S.C. sec. 2, for NYMEX Exchange's allegedly
trying to maintain a monopoly in the execution of the North America energy
futures and expand the alleged monopoly into the execution and clearing of North
American OTC energy contracts by attempting to deny ICE access to NYMEX Exchange
Settlement Prices; (2) a claim for purported violation of Section 1 of the
Sherman Act by conspiring with certain of its members to restrain trade by
attempting to deny ICE access to NYMEX Exchange Settlement Prices; (3) a claim
for alleged violation of Section 2 of the Sherman Act by NYMEX Exchange
purportedly denying ICE access to NYMEX Exchange's Settlement Prices which are
allegedly an "essential facility"; (4) a claim for purported violation of
Section 1 of the Sherman Act and Section 3 of the Clayton Act by NYMEX Exchange
allegedly tying execution services for North American energy futures and options
to clearing services; and (5) a claim for purported violation of the Lanham Act
through false advertising with respect to certain services offered by NYMEX
Exchange and services offered by ICE. The counterclaims request damages and
trebled damages in amounts not specified yet by ICE in addition to injunctive
and declaratory relief. NYMEX Exchange's response to the counterclaims was
served on February 26, 2003. On August 11, 2003, the Court issued an opinion
dismissing certain counterclaims and one affirmative defense, with leave to
replead. On about August 28, 2003, the NYMEX Exchange was served with ICE's
First Amended Counterclaims in which ICE makes four counterclaims against NYMEX
Exchange principally alleging violations of U.S. antitrust laws, including
claims regarding monopoly leveraging. This case is ongoing.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matter was submitted to a vote of security holders during the fourth quarter
of 2003.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Stock Trading Symbol -- Not applicable.

At present, there is no established trading market for the Company's common
stock. None of the Company's common stock is listed on any exchange or automated
quotation system. Each series of common stock is coupled with a Class A
membership interest in NYMEX Exchange and the two interests cannot be traded
separately. NYMEX Holdings' common stock, coupled with NYMEX Division
memberships are traded through a bid-ask system maintained by the Company's
membership department.

A proposed purchaser or transferee of common stock and trading rights must
meet certain financial requirements and have two member sponsors. All applicants
are subjected to a thorough review process in order to be approved. The Exchange
conducts a background investigation of each applicant focusing on the
applicant's credit standing, financial responsibility, character and integrity.

Due to the absence of an established public trading market and the limited
number and disparity of bids made for shares through year-end 2003, bid prices
for shares tend to be unrepresentative of the actual sales price of a share. The
high and low sales prices for a share of NYMEX Holdings Common Stock coupled
with NYMEX Division trading rights are reflected in the following seat sale
prices for each quarter of 2003 and 2002.

2003 HIGH LOW
---- ---------- ----------

First Quarter............................................... $1,325,000 $1,150,000
Second Quarter.............................................. $1,356,000 $1,170,000
Third Quarter............................................... $1,625,000 $1,500,000
Fourth Quarter.............................................. $1,625,000 $1,500,000

2002
----

First Quarter............................................... $ 900,000 $ 825,000
Second Quarter.............................................. $1,050,000 $ 920,000
Third Quarter............................................... $1,100,000 $1,000,000
Fourth Quarter.............................................. $1,300,000 $1,000,000

Dividend Policy -- On November 7, 2002, the Company's board of directors
declared a dividend of $6,127 per share to stockholders of record as of January
2, 2003. On July 9, 2003, the board of directors declared a dividend of $3,064
per share to stockholders of record as of July 15, 2003. On December 3, 2003,
the board of directors declared a dividend of $3,064 per share to stockholders
of record as of December 31, 2003. Prior to the November 7, 2002 declaration,
the Company had never paid dividends to its stockholders. The Company expects to
pay discretionary future dividends based upon continued profitability.

Number of Holders of Common Stock -- There were 599 holders of record of
the Company's common stock as of February 27, 2004.

Changes in Securities and use of Proceeds -- Not applicable.

ITEM 6. SELECTED FINANCIAL DATA (UNAUDITED).

The following table sets forth selected consolidated financial and other
information for the Company. The balance sheet and operating data as of and for
each of the years in the five-year period ended December 31, 2003 have been
derived from the audited consolidated financial statements and notes thereto.
The information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Consolidated Results of Operations and Financial
Condition" in this document, the consolidated financial statements and the notes
thereto, and other financial information, included in this report. Certain
reclassifications have been made to prior periods to conform to the current
presentation.

NYMEX HOLDINGS, INC.
SELECTED FINANCIAL DATA

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS,
RATIOS AND EMPLOYEES)

OPERATING DATA
Revenue
Clearing and transaction fees, net(1)........ $ 139,731 $ 140,763 $104,302 $ 92,500 $105,206
Market data fees............................. 31,700 33,459 34,313 33,622 34,689
Other(2)..................................... 12,737 14,982 5,666 4,747 4,540
---------- ---------- -------- -------- --------
Total revenues............................... 184,168 189,204 144,281 130,869 144,435
---------- ---------- -------- -------- --------
Expenses
Salaries and employee benefits............... 54,401 49,121 50,443 50,098 47,752
Occupancy and equipment...................... 26,664 24,364 20,663 19,921 16,934
Depreciation and amortization(3)............. 24,679 20,926 16,024 13,862 10,966
General and administrative................... 23,314 17,737 12,848 13,512 12,062
Professional fees............................ 17,427 17,954 12,753 15,625 8,424
Telecommunications........................... 5,934 7,639 10,878 10,767 11,860
Marketing.................................... 2,080 2,633 1,721 2,446 2,537
Other expenses............................... 8,652 9,445 7,203 4,905 4,984
Demutualization expenses(4).................. -- -- -- 4,281 593
Amortization of goodwill(5).................. -- -- 2,153 2,153 2,153
Impairment and disposition loss.............. 2,340 12,583 5,114 857 1,298
---------- ---------- -------- -------- --------
Total operating expenses..................... 165,491 162,402 139,800 138,427 119,563
---------- ---------- -------- -------- --------
Income (loss) from operations................ 18,677 26,802 4,481 (7,558) 24,872
Other income (expenses)
Investment income, net....................... 4,501 5,714 4,643 9,355 3,942
Interest expense............................. (7,237) (7,455) (7,662) (7,718) (7,721)
---------- ---------- -------- -------- --------
Income (loss) from operations before income tax
provision.................................... 15,941 25,061 1,462 (5,921) 21,093
Income tax (benefit) provision................. 7,061 12,762 782 (3,140) 8,903
---------- ---------- -------- -------- --------
Net income (loss).............................. $ 8,880 $ 12,299 $ 680 $ (2,781) $ 12,190
========== ========== ======== ======== ========
BALANCE SHEET DATA (PERIOD END)
Total assets................................... $ 477,676 $ 462,755 $415,591 $500,131 $423,087
Total tangible assets (excluding goodwill and
other intangible assets)..................... $ 459,475 $ 446,387 $399,262 $481,649 $402,452
Total liabilities.............................. $ 372,261 $ 361,220 $321,715 $415,471 $329,901
Long-term borrowings........................... $ 88,732 $ 91,551 $ 94,368 $ 97,185 $100,000
Total debt (including short-term portion)...... $ 91,549 $ 94,368 $ 97,185 $100,000 $100,000
Total shareholders' equity..................... $ 105,415 $ 101,535 $ 94,236 $ 84,659 $ 93,202
OTHER DATA
Book value per share(6)........................ $ 129,185 $ 124,430 $115,485 $103,749 $114,218
Cash dividends declared per common share(7).... $ 9,191 $ 6,127 $ -- $ -- $ N/A
Current ratio(8)............................... 1.7 1.8 2.0 1.4 3.3
Times interest earned(9)....................... 3.2 4.4 1.2 0.2 3.7
Cash flow coverage of fixed charges(10)........ 6.4 11.2 2.2 1.9 7.7
Working capital................................ $ 99,628 $ 93,011 $ 79,974 $ 74,913 $120,209
Capital expenditures........................... $ 13,446 $ 31,049 $ 27,221 $ 12,797 $ 20,022
Cash provided by operations.................... $ 31,999 $ 63,554 $ 8,749 $ 10,188 $ 43,204
Number of employees at end of period........... 481 489 478 544 609
Sales price per share(11)
High......................................... $1,625,000 $1,300,000 $825,000 $725,000 $630,000
Low.......................................... $1,150,000 $ 825,000 $685,000 $550,000 $551,000
Basic and diluted earnings (loss) per share.... $ 10,882 $ 15,072 $ 833 $ (3,408) $ 14,939
Total trading and clearing volume.............. 139,188 133,689 103,025 104,075 109,539
Total open interest............................ 4,967 4,184 3,201 2,853 3,044

---------------

(1) Clearing and transaction fees are presented net of payments to members
under the Company's proprietary fee reduction programs, which were $14,049,
$5,245, $6,693, $13,727, and $13,065 for the

years ended December 31, 2003, 2002, 2001, 2000, and 1999, respectively.
For a description of the proprietary fee reduction programs, see the Notes
to the Consolidated Financial Statements contained in Item 15 of this
report.

(2) In 1998, NYMEX Division introduced various incentive programs. These
programs reduced other revenue for the years ended December 31, 2003, 2002,
2001, 2000 and 1999 by $995, $1,915, $2,090, $2,808, and $2,377,
respectively.

(3) Depreciation and amortization expense is net of amortization of a deferred
credit for building construction of $2,145, annually.

(4) Effective January 1, 2002, the Company is no longer required to amortize
goodwill pursuant to SFAS No. 142. Instead, the carrying value of goodwill
is annually measured for impairment. Such a test was performed in the
fourth quarters of 2003 and 2002 and no impairment was required.

(5) Expenses incurred for the Company's 2000 demutualization consisted of
accounting, investment banking, legal, printing and SEC filing fees.

(6) Stockholders equity divided by the number of shares outstanding.

(7) Total cash dividends paid to stockholders divided by the number of shares
outstanding.

(8) Equals current assets divided by current liabilities.

(9) Income before income taxes and interest expense divided by interest
expense.

(10) Equals cash provided by operations plus income tax expense (or less income
tax benefit) plus interest expense divided by interest expense.

(11) Shares are purchased from existing members at prevailing market prices.
These prices are established through a bid-and-ask system coordinated by
the Company.

Certain reclassifications have been made to prior fiscal year balances in
order to conform to the current fiscal year presentation.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (IN THOUSANDS, EXCEPT STATISTICAL
AND PER SHARE DATA).

Introduction

This discussion summarizes the significant factors affecting the results of
operations and financial condition of the Company during the years ended
December 31, 2003, 2002 and 2001. This discussion is provided to increase the
understanding of, and should be read in conjunction with, the audited
consolidated financial statements, accompanying notes and tables included in
this Annual Report on Form 10-K.

Forward Looking and Cautionary Statements and Factors that May Affect Future
Results

Certain information in this report (other than historical data and
information) constitutes forward-looking statements regarding events and trends
that may affect the Company's future operating results and financial position.
The words "estimate," "expect," "intend" and "project," as well as other words
or expressions of similar meaning, are intended to identify forward-looking
statements. Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this Annual Report on Form 10-K.
These statements are based on current expectations. Assumptions are inherently
uncertain and are subject to risks that should be viewed with caution. Actual
results and experience may differ materially from forward-looking statements as
a result of many factors, including: changes in general economic and industry
conditions in various markets in which the Company's contracts are traded,
increased competitive activity, fluctuations in prices of the underlying
commodities as well as for trading floor administrative expenses related to
trading and clearing contracts, the ability to control costs and expenses,
changes to legislation or regulations, protection and validity of the Company's
intellectual property rights and rights licensed from others, and other
unanticipated events and conditions. It is not possible to foresee or identify
all such factors. The Company assumes no obligation to update publicly any
forward-looking statements.

Business Overview

NYMEX Holdings, Inc. ("NYMEX Holdings") was incorporated in 2000 as a stock
corporation in Delaware, and is the successor to the New York Mercantile
Exchange, which was established in 1872. The two principal operating
subsidiaries of NYMEX Holdings are the New York Mercantile Exchange, Inc.
("NYMEX Division") and the Commodity Exchange, Inc. ("COMEX Division"), which is
a wholly-owned subsidiary of NYMEX Division. Where appropriate, each operating
division, NYMEX Division and COMEX Division, will be discussed separately, and
collectively will be referred to as the "Exchange." When discussing NYMEX
Holdings together with its subsidiaries, reference is being made to the
"Company." The Company demutualized on November 17, 2000 at which time the book
value of the assets and liabilities of New York Mercantile Exchange carried over
to NYMEX Division. There are no restrictions limiting the payment of dividends.

The Company facilitates the buying and selling of energy and metal
commodities for future delivery under rules intended to protect the interests of
market participants. The Company provides liquid marketplaces where physical
commodity market participants can manage future price risk and, through the
Company's clearing operations, mitigate counter-party credit risk. Through
real-time and delayed dissemination of its transaction prices, the Company
provides price discovery and transparency to market participants. To enhance its
markets and provide market participants additional mechanisms to manage risk,
the Company continuously offers new products, distribution services and clearing
services. The Company does not own commodities, trade for its own account, or
otherwise engage in market activities.

The NYMEX Division provides a marketplace for trading energy futures and
options. The COMEX Division provides a marketplace for trading precious and base
metals futures and options. NYMEX Division's principal markets include Crude
Oil, Natural Gas, Heating Oil and Unleaded Gasoline. COMEX Division's principal
markets include Gold, Silver and High Grade Copper. The Company provides the
physical facilities for open outcry auction markets. The open outcry markets
operate during regular business hours, and trading activities in these markets
are, for purposes of this management discussion, referred to as floor trading.
Through its NYMEX ACCESS(R) and NYMEX ClearPort(SM) Trading technology, the
Company provides market participants the ability to conduct after-hours and
electronic trading for floor-based products as well as 23 hours per trading day
for additional products.

The Company provides trade-clearing services for transactions executed
through its floor trading operations, transactions executed through its NYMEX
ACCESS(R) and NYMEX ClearPort(SM) Trading electronic trading platforms, and
e-miNY(SM) transactions executed through GLOBEX(R). In addition, during the
second quarter of 2002, the Company launched an over-the-counter ("OTC")
clearing initiative, which was intended, among other things, to alleviate some
of the credit issues in the marketplace by using the Company's clearing
operations to offer market participants the advantages of reducing costs by
permitting futures and OTC positions to be offset. This initiative permits
market participants to negotiate bilateral trades in the OTC market, which are
then transferred to the Company's exchange as futures contracts for clearing.
Subsequent to its launch, this endeavor was renamed NYMEX ClearPort(SM)
Clearing.

During 2002, the Company launched a new trading program in conjunction with
the Chicago Mercantile Exchange ("CME"), where market participants can trade
certain of the NYMEX Division's futures contracts through the CME's GLOBEX(R)
electronic trading platform. The contracts traded through GLOBEX(R) are referred
to as e-miNYs(SM) and are smaller than the size of a normal NYMEX Division
futures contract. e-miNYs(SM) provide an additional risk management tool for
energy market participants and are designed to attract additional public
non-commercial customers to the Company's marketplace while leveraging
GLOBEX(R)'s distribution system.

To conduct floor-trading activities, market participants must own or lease
a membership on the NYMEX Division or COMEX Division. Non-members may also
execute floor trades on the Company's exchanges, but must do so through a
member. In addition to floor trading privileges, each NYMEX Division and COMEX
Division member holds one right to trade on the Company's electronic trading
platforms. NYMEX Division members may lease additional electronic trading rights
for a monthly fee established by the Company. In addition, non-members may
purchase NYMEX Division electronic trading privileges for a fee. Each

NYMEX Division membership also has one share of NYMEX Holdings common stock.
NYMEX Division members own all of NYMEX Holdings common stock.

Certain NYMEX Division and COMEX Division members are clearing members.
Clearing members provide capital to support the Company's clearing activities.
All market participants trading through the Company's floor trading and
electronic trading venues must have a clearing relationship with a clearing
member who will clear their trades through the Company's clearinghouse. Market
participants must have similar clearing member relationships to use NYMEX
ClearPort(SM) Clearing.

The Company's principal sources of revenues are clearing and transaction
fees derived from trades executed on its exchanges, and/or cleared through its
clearinghouse, and fees charged for the Company's proprietary futures and
options contract price information.

Clearing and transaction fees are dependent primarily upon the volume of
trading activity conducted on the Company's exchanges and cleared by the
Company's clearinghouse. These volumes are impacted by several factors,
including:

- National and international economic and political conditions;

- Volatility in price levels of the underlying commodities;

- Market perception of stability in commodities and financial markets;

- The level and volatility of interest rates and inflation;

- Credit quality of market participants; and

- Weather conditions affecting certain energy commodities.

The relative proportions of member and non-member trading activities, and
the trading venues on which market participants trade also impact the levels of
clearing and transaction fees. NYMEX Division and COMEX Division members are
afforded more favorable transaction pricing than non-members, and are eligible
to participate in certain transaction fee and cost reduction programs, which
impact the level of clearing and transaction fees and other revenues.

Market data relating to proprietary prices of contracts executed on the
Company's exchanges are sold to vendors who redistribute this information to
market participants and others. The level of market data fees is dependent upon
the number of vendors and the number of end users receiving data through the
vendor redistribution process. The Company relies on its market data vendors to
supply accurate information regarding the number of subscribers that are
accessing the Company's market data.

The Company's expenses consist primarily of employee compensation and
benefits and the cost of facilities, equipment, software and communications to
support the Company's trading and clearing operations. The Company also incurs
marketing costs associated with the development and launch of new products and
services. During 2003, 2002 and 2001, the Company invested in technology and
infrastructure to support market expansion, enhance its trading and clearing
technology, and develop new products and services. During 2001, the Company
incurred expenses associated with the recovery of its operations after the
September 11 terrorist attacks on the World Trade Center, which was located near
the building that houses the Company's headquarters and primary trading floors.
The terrorist attacks resulted in the closing of the Company's trading and
clearing operations for four business days, and rendered the Company's back-up
data and recovery center inoperable. To replace this site, the Company leased
temporary space in New Jersey while it developed a plan for a permanent business
recovery facility outside of New York City. In 2002, the Company leased space
for a suitable permanent recovery site, where it invested in the development of
back-up trading floors and a data center. The new recovery site became fully
operational in the second quarter of 2003. The data center is continuously
connected to the Company's primary operations to ensure immediate recovery in
the event that the Company's headquarters or primary trading floors become
inaccessible. During the fourth quarter of 2001, full year 2002 and the first
quarter of 2003, the Company incurred incremental occupancy and
telecommunications expenses relating to its temporary recovery site. In the
fourth quarter of 2002, the Company received

an insurance settlement relating to loss of revenue and costs incurred in its
recovery activities subsequent to the World Trade Center terrorist attacks.

During 2003, the Company continued the development of a new technology
strategy, which is designed to standardize and simplify the Company's technology
infrastructure. This new strategy is expected to reduce technology operating
costs and capital expenditures while enhancing processing speed and capacity. In
connection with this strategy, the Company recognized additional depreciation
and amortization expense in 2003 resulting from changes in estimated useful
lives of certain existing technology assets. The Company expects to recognize
additional charges relating to the decommissioning of existing technology assets
when its new technology infrastructure becomes fully operational during 2004.

During 2002, the Company adopted the provisions of a new accounting
standard for goodwill. The new standard generally provides that goodwill be
carried at the lower of book value on January 1, 2002 or a value determined by
regular impairment tests. During 2002, the Company ceased the amortization. The
requisite impairment tests were performed in 2003 and 2002 and demonstrated no
impairment of the Company's goodwill. Accordingly, the Company's results of
operations for 2003 and 2002 excluded expenses related to the amortization of
goodwill, which were recognized in prior periods.

MARKET CONDITIONS

In 2003, total futures and options trading and clearing volumes increased
4% to 139.2 million contracts. Increases in COMEX Division floor trading
volumes, NYMEX ACCESS(R) electronic trading volumes for both NYMEX Division and
COMEX Division contracts, and NYMEX ClearPort(SM) Clearing volumes were
partially offset by a decline in certain NYMEX Division floor-traded energy
contract volumes.

In 2002, total futures and options trading and clearing volumes increased
30% to 133.7 million contracts, driven by growth in all major contracts across
all trading and clearing venues.

NYMEX Division

In 2003, total futures and options trading volume for the NYMEX Division
decreased 6% to 108.7 million contracts. Futures contract volume decreased 4% to
88.1 million contracts and options volume decreased 14% to 20.5 million
contracts. In 2002, total futures and options volume increased 32% to a record
116.1 million contracts. In 2002, futures contract volume increased 27% to 92.3
million contracts and options volume increased 54% to 23.9 million contracts.

The following table sets forth trading volumes for the Company's major
energy futures and options products. Volumes are expressed as "round turn"
trades, which are matched buys and sells of the underlying contracts. Open
interest represents the number of contracts at December 31, for which clearing
members and their customers are obligated to the Exchange and are required to
make or take future delivery of the physical commodity (or in certain cases be
cash settled), or close out the position with an offsetting sale or purchase
prior to contract expiration. Options open interest represents unexpired,
unexercised option contracts.

NYMEX DIVISION CONTRACTS TRADED AND CLEARED
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)

2003 2002 2001
--------------------------- --------------------------- --------------------------
FUTURES OPTIONS TOTAL FUTURES OPTIONS TOTAL FUTURES OPTIONS TOTAL
------- ------- ------- ------- ------- ------- ------- ------- ------

Light sweet crude oil........... 45,437 10,237 55,674 45,679 11,461 57,140 37,531 7,726 45,257
Henry Hub natural gas........... 19,037 8,742 27,779 24,358 10,966 35,324 16,468 5,974 22,442
N.Y. heating oil................ 11,582 669 12,251 10,695 602 11,297 9,264 705 9,969
N.Y. Harbor unleaded gasoline... 11,172 616 11,788 10,980 722 11,702 9,224 1,040 10,264
Other........................... 916 251 1,167 557 117 674 294 31 325
------ ------ ------- ------ ------ ------- ------ ------ ------
Total........................... 88,144 20,515 108,659 92,269 23,868 116,137 72,781 15,476 88,257
====== ====== ======= ====== ====== ======= ====== ====== ======

NYMEX DIVISION CONTRACTS OPEN INTEREST
AT DECEMBER 31,
(IN THOUSANDS)

2003 2002 2001
------------------------- ------------------------- -------------------------
FUTURES OPTIONS TOTAL FUTURES OPTIONS TOTAL FUTURES OPTIONS TOTAL
------- ------- ----- ------- ------- ----- ------- ------- -----

Light sweet crude oil........... 600 733 1,333 581 1,167 1,748 419 692 1,111
Henry Hub natural gas........... 318 740 1,058 380 987 1,367 404 766 1,170
N.Y. heating oil................ 138 56 194 166 71 237 150 66 216
N.Y. Harbor unleaded gasoline... 108 21 129 115 48 163 121 35 156
Other........................... 34 20 54 12 17 29 9 2 11
----- ----- ----- ----- ----- ----- ----- ----- -----
Total........................... 1,198 1,570 2,768 1,254 2,290 3,544 1,103 1,561 2,664
===== ===== ===== ===== ===== ===== ===== ===== =====

Light Sweet Crude Oil

In 2003, futures contract volume decreased less than 1% and options
contract volume decreased 11% from record-high levels in 2002. Total futures and
options contract volume decreased 3% from 2002. After strong first quarter
results due to increased volatility tied to the start of the Iraq War, the
remaining three quarters were characterized by less hedging activity as the
hostilities subsided. Consequently, as global tensions eased, the volatility
levels also decreased, leading to lower options trading volumes than 2002.

In 2002, futures contract volume increased 22% and options contract volume
increased 48%. Total futures and options contract volume increased 26% from
2001. Heightened volatility levels, uncertainty with regard to world production,
an oil workers strike in Venezuela, a surge in price levels, and global tensions
resulted in hedging activity at near-record levels. Continued credit concerns in
the OTC market, particularly the collapse of Enron and credit issues within the
merchant energy sector, also contributed to the increase.

Henry Hub Natural Gas

In 2003, futures contract volume decreased 22% and options volume decreased
20%. Total futures and options contract volume decreased 21% from 2002. In 2002,
futures contracts volume increased 48% and options contract volume increased
84%. Total futures and options volume increased 57% from 2001.

During 2003, 2002 and 2001, the natural gas industry continued to
experience a shift in the drivers of supply and demand. While overall demand
remained relatively constant, the proportion of demand represented by
electricity generation has increased and natural gas use by the industrial
sector has decreased. Demand stemming from suppliers of electricity with peak
electricity load requirements, compared to the relatively stable demand
requirements of the industrial sector. Additionally, new housing construction
has shifted toward natural gas heat from other fuel sources, driving increased
weather-sensitive consumer demand. The Company believes that these fundamental
changes in market drivers have caused changes in price volatility patterns,
resulting in increased natural gas hedging activity.

Additionally, the merchant energy sector has historically been a
significant participant in the natural gas futures and options markets. During
2002, trading activity in this sector remained high, even as major market
participants began reducing their positions as they addressed credit issues. In
2003, natural gas futures and options trading levels declined from 2002 due to
the absence of these participants, but remained at historically high levels due
to the fundamental market changes discussed above.

Heating Oil

In 2003, futures contract volume increased 8% and options contract volume
increased 11%. Total futures and options volume increased 8% from 2002. Stronger
economic activity and colder weather in the Northeastern United States led to
higher demand for heating oil and increased hedging activity.

In 2002, futures contract volume increased 15% while options volume
decreased 15%. Total futures and options volume increased 13%. Heightened
international tensions, unusually cold weather in the United States during the
fourth quarter, and the oil worker strike in Venezuela all contributed to
increases in hedging activity. Increasing price differentials with crude oil
also drove higher futures volume.

New York Harbor Unleaded Gasoline

In 2003, futures contract volume increased 2% while options contract volume
decreased 15%. Total futures and options volume increased 1% from 2002. In 2003,
strong consumer demand for gasoline resulted in increased trading volume and
related hedging activity. In addition, the continued strength in the price
differentials between gasoline and crude oil led to increased trading activity.

In 2002, futures contract volume increased 19% while options contract
volume decreased 31%. Total futures and options contract volume increased 14%
from 2001. Heightened international tensions and the oil worker strike in
Venezuela contributed to increased hedging activity. Temporary improvements in
economic conditions in the early part of the year contributed to increased
demand for refined products. The decline in options contract volume was driven,
in part, by declining differentials between unleaded gasoline and crude oil
prices.

COMEX Division

In 2003, total futures and options trading volume for the COMEX Division
increased 39% to 24.5 million contracts. Futures contract volume increased 30%
to 19.5 million contracts and options volume increased 96% to 4.9 million
contracts. In 2002, total futures and options volume increased 19% to 17.6
million contracts. Futures contract volume increased 23% to 15.0 million
contracts and options volume was unchanged at 2.5 million contracts. The
following table sets forth trading volumes for the Company's major metals
futures and options products.

COMEX DIVISION CONTRACTS TRADED AND CLEARED
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)

2003 2002 2001
-------------------------- -------------------------- --------------------------
FUTURES OPTIONS TOTAL FUTURES OPTIONS TOTAL FUTURES OPTIONS TOTAL
------- ------- ------ ------- ------- ------ ------- ------- ------

Gold................. 12,236 4,310 16,546 9,018 1,949 10,967 6,785 1,975 8,760
Silver............... 4,111 560 4,671 3,136 535 3,671 2,569 483 3,052
High grade copper.... 3,089 47 3,136 2,807 33 2,840 2,857 51 2,908
Other................ 107 3 110 74 -- 74 48 -- 48
------ ----- ------ ------ ----- ------ ------ ----- ------
Total................ 19,543 4,920 24,463 15,035 2,517 17,552 12,259 2,509 14,768
====== ===== ====== ====== ===== ====== ====== ===== ======

COMEX DIVISION CONTRACTS OPEN INTEREST
AT DECEMBER 31,
(IN THOUSANDS)

Gold.................. 279 621 900 207 213 420 115 202 317
Silver................ 102 61 163 81 48 129 63 69 132
High grade copper..... 88 11 99 80 3 83 74 11 85
Other................. 9 -- 9 9 -- 9 3 -- 3
--- --- ----- --- --- --- --- --- ---
Total................. 478 693 1,171 377 264 641 255 282 537
=== === ===== === === === === === ===

Gold

In 2003, record futures and options trading volume was established with
futures volume 36% higher and options volume 121% higher than in 2002. Total
futures and options volume increased 51% from 2002 levels. Uncertainty regarding
geopolitical conditions, rapidly rising physical commodity prices and a weakened
United States currency led to increased hedging and speculative demand for
futures and options.

In 2002, futures contract volume increased 33% and options contract volume
decreased 1%. Total futures and options contract volume increased 25%. Factors
such as world tensions, a rebounding economy, and a weakening U.S. currency
contributed to the increased volume. Prices rose significantly on the
front-month contract from approximately $270 to about $380 per ounce.

Silver

In 2003, futures contract volume increased 31% and options volume increased
by 5%. Total futures and options volume increased by 27% over 2002. Uncertainty
regarding geopolitical conditions, rapidly rising physical commodity prices and
a weakened United States currency led to increased hedging and speculative
demand for futures and options.

In 2002, futures contract volume increased 22% and options contract volume
increased 11%. Total futures and options contract volume increased 20%. Economic
growth and a weak U.S. currency contributed to the increase. An increased number
of options available to be traded because of the history of additional strike
price intervals contributed to increased options trading volumes.

High Grade Copper

In 2003, futures contract volume increased 10% and options contract volume
increased 42%. Total futures and options volume increased 10% from 2002. Strong
housing starts in the United States, coupled with increased international demand
and changes in supply patterns, contributed to increased market volatility,
which resulted in significant increases in futures and options trading levels.
Options represent less than 2% of total futures and options volume.

In 2002, futures contract volume decreased 2% and options contract volume
decreased 35%. Volume was relatively steady as price pressures from the
increased demand for the physical commodity were offset by greater production
levels and supply competition.

NYMEX ClearPort(SM) Clearing

In 2003, futures contract clearing volume increased to 6.0 million from 0.5
million in 2002. While the Company's open outcry and electronic trading venues
experienced a decline in natural gas futures and options trading volumes in
2003, there was significant growth in natural gas futures clearing volume
through NYMEX ClearPort(SM) Clearing. The Company believes this growth was due,
in part, to traditional OTC market participants seeking the credit risk
mitigation provided by the Company's clearinghouse for their off-exchange trade
execution activities. NYMEX ClearPort(SM) Clearing was launched during the
second quarter of 2002. The table below sets forth clearing volumes for products
cleared through NYMEX ClearPort(SM) Clearing.

NYMEX CLEARPORT(SM) CLEARING CONTRACTS CLEARED
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)

FUTURES
------------
2003 2002
----- ----

NYMEX CLEARPORT(SM) CLEARING OPEN INTEREST
AT DECEMBER 31,
(IN THOUSANDS)

FUTURES
------------
2003 2002
----- ----

CRITICAL ACCOUNTING POLICIES

The Securities and Exchange Commission ("SEC") has requested that all
registrants discuss their three to five most "critical accounting policies" in
Management's Discussion and Analysis. The SEC indicated that a "critical
accounting policy" is one which is both important to the portrayal of the
company's financial condition and results of operations and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. The Company believes that the following accounting policies fit this
definition:

Internally Developed Software

Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, provides guidance on the
accounting treatment of costs related to software obtained or developed for
internal use. The Company has capitalized certain costs to develop internal-use
software, consisting primarily of software tools and systems. Because most of
its capital expenditures are not exclusively used on developing internally used
software, the Company allocates these costs on a project-by-project basis. The
Company capitalizes these costs related to software developed for internal use
based on the results of this allocation. The Company capitalized approximately
$2 million, $9 million and $13 million of internal-use software costs during the
years ended December 31, 2003, 2002 and 2001, respectively. These amounts are
included in property and equipment, net, in the Company's consolidated balance
sheets. The Company amortizes these capitalized costs to expense over an
estimate of the useful life of the internal-use software, which is generally
three to five years.

Clearing and Transaction Fee Revenues

The largest source of the Company's operating revenues is clearing and
transaction fees. These fees are recognized as revenue in the same period that
trades are executed and/or cleared on the Company's exchanges. During each of
the years ended December 31, 2003, 2002 and 2001, the Company had in effect a

proprietary fee reduction program. Under this program, NYMEX Division members
received from the Company, either directly or through a clearing member,
payments representing a reduction of their clearing and transaction fees.
Clearing and transaction fees were recorded net of these payments in the
Consolidated Statements of Income. The amount of payments under this program was
based on each member's individual trading and clearing volumes, and represented
a stated per-side transaction fee reduction. The level of the per-side fee
reduction was set periodically by the Company's board of directors. Changes in
the level of this fee reduction impacted comparisons of clearing and transaction
revenues in 2003, 2002 and 2001. During 2003, a similar program was implemented
for COMEX Division members. For the years ended December 31, 2003, 2002 and
2001, clearing and transaction fees were reduced by $14.0 million, $5.2 million
and $6.7 million, respectively, for these payments. Effective December 31, 2003,
the Company eliminated the proprietary fee reduction programs for NYMEX Division
and COMEX Division members, although similar programs may be implemented in the
future.

Clearing and transaction fees receivable are monies due the Company from
clearing member firms. Exposure to losses on receivables is principally
dependent on each clearing member firm's financial condition. Clearing members'
seats collateralize fees owed to the Company. At December 31, 2003, no clearing
and transaction fees receivable balance was greater than the related clearing
member's seat value. Management does not believe that a concentration of credit
risk exists from these receivables. The Company has the right to liquidate a
member's seat in order to satisfy its receivable.

Clearing and transaction fees receivable are carried net of allowances for
member credits, which are based upon expected billing adjustments. Allowances
for member credits were $377,000 and $500,000 at December 31, 2003 and 2002,
respectively. The Company believes the allowances are adequate to cover member
credits. The Company also believes the likelihood of incurring material losses
due to non-collectibility is remote and, therefore, no allowance for doubtful
accounts is necessary.

Market Data Revenue

The Company provides real time information to subscribers regarding prices
of futures and options contracts traded on the Exchange. As is common business
practice in the industry, fees are remitted to the Company by market data
vendors on behalf of subscribers. Revenues are accrued for the current month
based on the most recent month reported by the vendors. The Company conducts
periodic audits of the information provided. Revenues derived from audit
recoveries are recognized when cash is received from the market data vendor.
Allowances for uncollectible receivables of $243,000 and $385,000 were applied
as a reduction to the December 31, 2003 and 2002 market data fees receivable
balances, respectively. These allowances are intended to cover potential
non-collectible vendor receivables as well as future adjustments by the market
data vendor customers. At December 31, 2003, the combined amounts due from four
vendors represented a receivable balance greater than 50% of the total balance.

Other Revenues

Other revenues consist of rental income from tenants leasing space in the
Company's headquarters building, compliance fines assessed for violation of
trading rules and procedures, fees charged to members for the use of telephone
equipment, long distance telephone service and trading booths provided by the
Company, fees charged for access to the NYMEX ACCESS(R) electronic trading
system and other miscellaneous revenues. Other revenues are recognized on an
accrual basis in the period during which the Company derives economic value,
with the exception of compliance fines, which are recognized when cash is
received.

Accounts receivable for other revenues are included in other current assets
on the Company's consolidated balance sheets. Allowances for uncollectible
receivables at December 31, 2003 were $610,000. No allowances were established
at December 31, 2002 as the likelihood of incurring losses due to uncollectible
accounts was deemed remote.

Accounting for the Impairment or Disposal of Long-Lived Assets

The Company reviews long-lived assets for impairment, in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS No. 144). If facts and
circumstances indicate that the Company's long-lived assets might be impaired,
the estimated future undiscounted cash flows associated with the long-lived
assets would be compared to its carrying value to determine if a write-down to
fair value is necessary. If a write-down is required, the amount is determined
by comparing fair market values to carrying values in accordance with SFAS No.
144.

During fiscal years 2003, 2002 and 2001, the Company determined that an
impairment loss had taken place for capitalized computer equipment and software
which was deemed to be obsolete. The loss on disposition of these assets are
included in the Consolidated Statements of Income representing the net book
value of property retired from service and is recorded as a loss on impairment
of computer equipment and software. For the years ended December 31, 2003, 2002
and 2001, the losses on impairment of computer equipment and software were $2.3
million, $12.6 million and $5.1 million, respectively. The loss in 2001 was
primarily attributed to the World Trade Center terrorist attack.

Depreciation Expense

Depreciation expense for the years ended December 31, 2003, 2002 and 2001
was approximately $24.7 million, $20.9 million and $16.0 million, respectively.
Buildings and improvements are recorded net of amortization of the deferred
credit related to the grant for the building of $2.1 million for each year.
Amortization of leasehold improvements, are included with depreciation expense
in the accompanying financial statements.

During 2003, the Company continued development of a new technology
strategy, which is designed to standardize and simplify the Company's technology
infrastructure. In conjunction with this strategy, the functionality and useful
lives of existing technology assets were evaluated. As a result of this
evaluation, the Company shortened the estimated useful lives of a significant
component of its existing technology infrastructure, resulting in a $5.3 million
charge to the fourth quarter of 2003.

Deferred Credits

In 1995, the Company secured a grant of $128.7 million from the New York
City Economic Development Corporation ("EDC") and the Empire State Development
Corporation ("ESDC", formerly known as the New York State Urban Development
Corporation) for construction of corporate headquarters and trading facility.
The grant is being recognized in income on the same basis as, and is a reduction
to, the depreciation of the facility.

In 2002, the Company entered into an agreement and received a $5 million
grant from the ESDC. This agreement requires the company to maintain certain
annual employment levels, and the grant is subject to recapture amounts on a
declining scale over time. The grant is recognized in income ratably in
accordance with a recapture schedule.

RESULTS OF OPERATIONS

In 2003, net income decreased 28% to $8.9 million. Operating revenues
declined 3% to $184.2 million and operating expenses increased 2% to
$165.5 million. Growth in core revenues related to increased trading and
clearing volumes was more than offset by an increase in the level of payments
made under the Company's proprietary fee reduction program and a decline in
other revenues. During 2002, other revenue included a one-time benefit from an
insurance settlement related to the World Trade Center terrorist attack.
Operating expenses increased due primarily to higher general and administrative
expenses, which were driven by the introduction of certain incentive programs
designed to increase trading and clearing volumes and provisions associated with
the settlement of a significant legal matter.

In 2002, net income was $12.3 million compared to $0.7 million in 2001.
Operating revenues increased 31% to $189.2 million and operating expenses
increased 16% to $162.4 million. The increase in operating

revenues was driven by increases in trading and clearing volumes and an
insurance recovery related to business losses resulting from the World Trade
Center terrorist attack. Operating expenses increased due to higher occupancy
and equipment costs associated with the Company's disaster recovery efforts,
litigation-related expenses and the write-off of a significant component of
capitalized software development costs.

REVENUES

Clearing and Transaction Fees, Net

Clearing and transaction fees were $139.7 million in 2003 compared to
$140.8 million in 2002. Increases in revenue resulting from a 4% increase in
futures and options trading and clearing volumes were more than offset by an
increase in the level of fees refunded to members under the Company's
proprietary fee reduction program. In 2002, clearing and transaction fees
increased 35% to $140.8 million, due primarily to a 30% increase in the number
of futures and options contracts traded and cleared and a reduction in the level
of fees refunded under the proprietary fee reduction program.

The following tables set forth clearing and transaction fee revenues and
the average clearing and transaction revenue per contract.

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
CLEARING AND TRANSACTION FEE REVENUE 2003 2002 2001
------------------------------------ --------- --------- ---------
(IN THOUSANDS)

Gross fees........................................... $153,780 $146,008 $110,995
Propriety fee reduction program...................... (14,049) (5,245) (6,693)
-------- -------- --------
Clearing and transaction fees, net................... $139,731 $140,763 $104,302
======== ======== ========

FOR THE YEAR ENDED
DECEMBER 31,
AVERAGE CLEARING AND TRANSACTION ------------------------
FEE REVENUE PER CONTRACT 2003 2002 2001
-------------------------------- ------ ------ ------

Gross revenue per contract................................. $ 1.10 $ 1.09 $ 1.08
Impact of fee reduction program............................ (0.10) (0.04) (0.07)
------ ------ ------
Revenue per contract, net.................................. $ 1.00 $ 1.05 $ 1.01
====== ====== ======

Gross revenue per contract increased in 2003 as the Company derived a
higher proportion of its transaction volume from electronic trading and NYMEX
ClearPort(SM) Clearing. The Company charges higher fees for these venues than
for floor trading. In fiscal year 2002, gross revenue per contract increased due
to increased levels of electronic trading.

Effective December 31, 2003, the Company ended the proprietary fee
reduction program. The Company expects that the elimination of this program will
result in increased levels of clearing and transaction fees in 2004. The Company
may introduce similar programs in the future.

Market Data

Market data revenues decreased 5% in 2003 to $31.7 million, and 2% in 2002
to $33.5 million, due primarily to declines in the number of subscriber units,
which were driven by the consolidation of energy trading desks associated with
contraction of the financial services sector of the commodities markets.

Other Revenues

Other revenues decreased 15% in 2003 to $12.7 million, due primarily to the
inclusion in 2002 of a one-time insurance settlement related to the World Trade
Center terrorist attack. Partially offsetting this decrease were a large
compliance fine levied on one of the Company's clearing members during the third
quarter of 2003, and an increase in lease revenue related to the trading floor
and office space leased to the Board of Trade

of the City of New York ("NYBOT"). In 2002, the Company and NYBOT entered into a
lease for this space, which expires in 2013.

Other revenues increased $9.3 million in 2002 to $15.0 million. During
2002, the Company received an insurance settlement related to the reimbursement
of expenses associated with its business recovery efforts and revenue losses
resulting from the World Trade Center terrorist attack. The portion of the
insurance recovery relating to expense reimbursement was credited to deferred
recovery expenses. The remainder of the insurance recovery was recorded in other
revenues, driving the increase in other revenues from 2001.

OPERATING EXPENSES

Salaries and employee benefits increased 11% in 2003 to $54.4 million, due
primarily to higher levels of incentive compensation and lower levels of
capitalized compensation related to internal software development activities.
Partially offsetting these increases was a credit, recorded in 2003, that
resulted from a reduction of the Company's post retirement benefit liability.
Salaries and employee benefits decreased 3% in 2002 to $49.1 million. In 2001,
salaries and employee benefits reflected a significant charge for severance
costs resulting from a reduction in workforce in June 2001. The reduction in
salaries and employee benefits expenses from the absence of this charge in 2002
was partially offset by higher average compensation levels in 2002.

Occupancy and equipment increased 9% in 2003 to $26.7 million, due
primarily to increased occupancy costs at the Company's headquarters facility
and permanent business recovery site. During the second quarter of 2003, the
Company's temporary disaster recovery site was closed when its permanent
recovery site became fully operational, reducing the Company's rent expense. The
Company expects occupancy and equipment expense to decline in 2004 due to the
elimination of its temporary disaster recovery site. Occupancy and equipment
expenses increased 18% in 2002 to $24.4 million. Rent expense increased as the
Company began leasing space in its permanent business recovery site and incurred
additional rental expenses at its temporary disaster recovery site. Security
expense increased due to heightened security measures subsequent to the World
Trade Center terrorist attack.

Depreciation and amortization increased 18% to $24.7 million in 2003, due
to a change in the estimated useful lives of certain computer equipment. During
2003, the Company continued development of a new technology strategy, which is
designed to standardize and simplify the Company's technology infrastructure.
Implementation of this strategy is expected to reduce technology operating costs
while enhancing processing speed and capacity. In conjunction with this
strategy, the functionality and useful lives of existing technology assets were
evaluated. As a result of this evaluation, the Company shortened the estimated
useful lives of a significant component of its existing technology
infrastructure, resulting in a $5.3 million charge to the fourth quarter of
2003. This change in useful life estimates will result in higher depreciation
and amortization expense during the first nine months of 2004 than was
recognized for the first nine months of 2003. Depreciation and amortization
increased 31% in 2002 to $20.9 million, due primarily to amortization of
capitalized costs for internally developed computer software that was placed in
service near the end of 2001 and during 2002.

General and administrative expenses increased 32% to $23.3 million in 2003.
During 2003, the Company implemented certain programs designed to provide
incentives to third parties to place business with the Company. Also
contributing to the increase were higher insurance costs and litigation-related
provisions associated with a significant legal settlement. Increases in
insurance costs were driven primarily by the premium on a default insurance
policy obtained in 2003 to provide protection to the Company's clearinghouse in
the event of a clearing member default that exceeds the guaranty funds, and the
continuing effect of increases in property insurance premiums in 2002. (For
information regarding the guaranty fund, see the Notes to the Consolidated
Financial Statements.) General and administrative expenses increased 38% in 2002
to $17.7 million, due primarily to an increase in litigation-related expenses
and higher insurance costs resulting from increases in property insurance
premiums, which were driven by a weakened insurance market subsequent to the
World Trade Center terrorist attack.

Professional services decreased 3% in 2003 to $17.4 million. Decreases in
legal fees were substantially offset by consulting fees related to compliance
with the Sarbanes-Oxley Act of 2002. Professional services

increased 41% in 2002 to $18.0 million, due primarily to expenses relating to
the Company's involvement in certain ongoing litigation, and consulting fees
related to the Company's insurance recovery and evaluation of certain business
processes.

Telecommunications decreased 22% in 2003 to $5.9 million, due primarily to
the inclusion in 2002 of one-time charges related to the termination of
telecommunications services. Telecommunications decreased 30% in 2002 to $7.6
million, due primarily to lower communications expenses to support the Company's
NYMEX ACCESS(R) electronic trading platform. NYMEX ACCESS(R) became
internet-based during the third quarter of 2001, eliminating expenses that
supported direct connectivity to its users. Savings from eliminating this
expense were partially offset by charges the Company incurred in 2002 to
terminate the telecommunications agreement for this connectivity.

The Company recorded charges related to the impairment and disposition of
capitalized software and computer equipment of $2.3 million, $12.6 million and
$5.1 million in 2003, 2002 and 2001, respectively. Impairment and disposition
charges in 2002 resulted primarily from the write-off of capitalized computer
software which management deemed to have no meaningful remaining useful life due
to a new strategy relating to implementation of electronic trading and clearing
systems. In the fourth quarter of 2002, the Company entered into a software
licensing agreement with TradinGear.com ("TG") to provide the Company with trade
matching software and support. This software was purchased from TG in March 2003
and became the basis for the NYMEX ClearPort(SM) Trading system launched in the
first quarter of 2003. During 2003, NYMEX ClearPort(SM) Trading became the venue
for electronically trading NYMEX energy futures and options contracts that are
not listed for trading on the NYMEX Exchange floor. The Company's assessment of
the impairment of capitalized software costs was based, in part, on its
expectation that NYMEX ClearPort(SM) Trading will become the mechanism through
which all other electronic trading on the Company's exchanges is conducted. The
Company expects to fully migrate the electronic trading onto NYMEX ClearPort(SM)
Trading during 2004. Impairment and disposition charges in 2001 were primarily
related to the Company's decision to reposition its internet-based electronic
trading strategy through NYMEX ACCESS(R), abandoning the development of an
alternative strategy. Software development costs capitalized in conjunction with
that alternative strategy were written off when it was abandoned. During 2003,
the Company continued development of a new technology strategy designed to
standardize and simplify its technology infrastructure. Among other
improvements, this new strategy consolidates several major operating systems
onto one technology infrastructure platform. Future implementation of the new
technology infrastructure will render certain existing technology assets
obsolete. The Company expects to recognize charges in 2004 related to
disposition of these assets.

Marketing expenses decreased 21% in 2003 to $2.1 million, and increased 53%
in 2002 to $2.6 million. Marketing expenses in 2002 included costs related to
the introduction of e-miNY(SM) contract and the introduction of the Company's
OTC clearing initiative, which is now known as NYMEX ClearPort(SM) Clearing.

Other expenses decreased 8% in 2003 to $8.7 million, driven by lower levels
of charitable contributions in 2003, which were partially offset by an increase
in the Company's contribution toward member medical benefits. Other expenses
increased 31% in 2002 to $9.4 million, due primarily to higher member benefit
costs and higher returns allocated to the COMEX Members' Recognition and
Retention Plan assets. Member benefit costs increased due to higher premium
rates and expanded member medical benefits. Earnings for the COMEX Members'
Recognition and Retention Plan are included in investment income, net on the
consolidated statements of operations, with an equal and offsetting charge
recorded in other expenses.

OTHER INCOME AND EXPENSES

Other income and expenses consists of investment income, net of investment
advisory expenses and interest expense on the Company's long-term debt.
Investment income decreased 21% in 2003 to $4.5 million, and increased 23% in
2002 to $5.7 million. The decrease in 2003 was due primarily to realized and
unrealized losses on the Company's fixed income portfolio. These losses were
partially offset by gains on the Company's equity portfolios. The increase in
2002 was due primarily to unrealized gains on the Company's fixed income

portfolio, which compared to unrealized losses in 2001. The Company's fixed
income portfolio is invested principally in municipal bonds, the market value of
which is impacted by changes in interest rates. Interest earned on cash and
investments is a significant component of investment income. Interest revenues
were relatively consistent during 2003, 2002 and 2001. Interest expense declined
in 2003 and 2002 due to repayment of principal on the Company's long-term debt.

PROVISION FOR INCOME TAXES

The Company's effective tax rate was 44.3% in 2003, 50.9% in 2002 and 53.5%
in 2001. The effective tax rate declined in 2003 due primarily to a higher
proportion of tax-exempt income. The effective tax rate declined in 2002 due
primarily to the fact that permanent differences had less of an effective tax
rate impact on 2002 due to a higher level of pre-tax book income. Additionally,
in 2001 and 2000, goodwill amortization was treated as a permanent difference
for tax purposes. Under a new accounting standard, goodwill is no longer
amortized for financial reporting purposes, thus eliminating this permanent
difference in 2002. The provision reflects changes in estimates, as well as
uncertainties regarding utilization of loss carry forwards. See the Notes to the
Consolidated Financial Statements for a complete discussion of income taxes.

FINANCIAL CONDITION AND CASH FLOWS

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2003 and 2002, the Company had $111.7 million and $108.8
million, respectively, in cash and cash equivalents, securities purchased under
agreements to resell and marketable securities. Working capital at December 31,
2003 and 2002 was $99.6 million and $93.0 million, respectively. On April 14,
2003, the Company received long-term AA+ and short-term A-1+ counter-party
credit ratings from Standard & Poor's Rating Services.

CASH FLOW; SOURCES AND USES OF CASH

The Company's principal sources of cash are fees collected from clearing
members for trading and/or clearing futures and options transactions, fees
collected from market data vendors for distribution of the Company's proprietary
contract price information, and rent collected from tenants leasing space in the
Company's headquarters building. Principal uses of cash include operating
expenses, income taxes, capital expenditures, debt service, dividends and
payments made to members and third parties under certain incentive programs.
Following is a summary of significant cash flows for the years ended December
31, 2003, 2002 and 2001.

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
2003 2002 2001
--------- --------- ---------
(IN THOUSANDS)

Net cash provided by operating activities............ $ 31,999 $ 63,554 $ 8,749
Capital expenditures................................. (13,446) (31,049) (27,221)
Principal payments on long-term debt................. (2,819) (2,817) (2,815)
Dividends paid to stockholders'...................... (7,500) -- --
Other net cash flows................................. (3,195) (94) 488
-------- -------- --------
Net change in cash and investments................... 5,039 29,594 (20,799)
(Increase) decrease in securities purchased under
agreements to sell................................. (4,290) (34,260) 23,609
-------- -------- --------
Net change in cash and cash equivalents.............. $ 749 $ (4,666) $ 2,810
======== ======== ========

Net cash provided by operating activities includes cash inflows related to
operating revenues, net of cash outflows relating to operating expenses, income
taxes and payments to members and third parties under certain incentive
programs. In 2003, net cash provided by operating activities declined to $32.0
million due

primarily to an increase in the level of payments to members under the Company's
proprietary fee reduction program, payments relating to the implementation of
programs designed to provide incentives to third parties to place business with
the Company, and the one-time inclusion in 2002 operating cash flow of the
proceeds from an insurance settlement relating to the World Trade Center
terrorist attack. In 2002, net cash provided by operating activities increased
$63.6 million due primarily to increased business activities, a reduction in the
level of payments to members under the Company's proprietary fee reduction
program, the World Trade Center terrorist attack insurance settlement, and the
inclusion in 2001 of a $33.3 million payment to NYMEX Division members upon
liquidation of the NYMEX Division Members' Retention and Retirement Plan.
Effective December 31, 2003, the Company eliminated the NYMEX Division
proprietary fee reduction program. The Company may introduce similar programs in
the future. Absence of this program will benefit future operating cash flows.

In 2003, capital expenditures were $13.4 million, related primarily to the
completion of the Company's permanent disaster recovery site, upgrades of
trading floor and back office technology equipment, and equipment acquired as
part of the Company's new technology strategy. In 2002, capital expenditures of
$31.0 million related primarily to technology equipment, software development
and leasehold improvements. In 2001, capital expenditures of $27.2 million
related primarily to technology equipment and capitalized software development
costs. During 2003, the Company continued development of a new technology
strategy, which is designed to standardize and simplify its technology
infrastructure. As a result of this new strategy and the completion of its
permanent disaster recovery site, the Company expects a reduction in the level
of capital expenditures in 2004.

In November 2002, the Company and NYBOT entered into a ten-year lease,
under which NYBOT is leasing office and trading floor space in the Company's
headquarters building. Rent commenced for the office space on various occupancy
dates during 2003. Operating cash flows in 2004 will benefit from full-year rent
receipts under this lease.

Other net cash flows in 2003 include payments of $3.0 million related to
the acquisition of certain assets of TG, a trading software development company.
The Company utilizes TG's proprietary technology for its NYMEX ClearPort(SM)
Clearing and Trading platforms.

During 2003, the Company paid a dividend to its stockholders of $9,191 per
share, which consisted of declared dividends in November 2002 and July 2003 of
$6,127 and $3,064 per share, respectively. The Company's board of directors
declared a $3,064 per share dividend in December 2003, which was paid in January
2004. Prior to the November 2002 declaration, the Company had never paid
dividends to its shareholders. The Company reserves the right to pay
discretionary future dividends.

The Company believes that its cash flows from operations and existing
working capital will be sufficient to meet its needs for the foreseeable future,
including capital expenditures, debt service and dividends. Subject to certain
limitations under existing long-term note agreements, the Company has the
ability, and may seek to raise capital through the issuance of debt or equity in
the private and public capital markets.

INVESTMENT POLICY

The Company maintains cash and short-term investments in an amount
sufficient to meet its working capital requirements. The Company's investment
policies are designed to maintain a high degree of liquidity, emphasizing safety
of principal and total after tax return. Excess cash on hand is generally
invested overnight in securities purchased under agreements to resell. Cash that
is not required to meet daily working capital requirements is invested primarily
in high-grade tax-exempt municipal bonds, and obligations of the United

States government and its agencies. The Company also invests in equity
securities. At December 31, 2003 and 2002, cash and investments were as follows
(in thousands):

2003 2002
-------- --------

Cash and cash equivalents................................... $ 1,763 $ 1,014
Securities purchased under agreements to resell............. 45,050 40,760
Marketable securities....................................... 64,885 66,976
-------- --------
Total..................................................... $111,698 $108,750
======== ========

Included in marketable securities at December 31, 2003 are investments
totaling $11.7 million relating to the COMEX Division Members' Recognition and
Retention Plan. This plan provides benefits to certain COMEX Division members
based on long-term membership, and participation is limited to individuals who
were COMEX Division members prior to the Company's acquisition of COMEX in 1994.
The Company is required to fund this plan with a minimum annual contribution of
$400,000, up to a maximum $800,000, until the plan is fully funded. The Company
made contributions to this plan by increasing the segregated investment in
marketable securities by $800,000 in each of the years ended December 31, 2003,
2002, and 2001. Based on continued funding of $800,000 per year and certain
actuarial assumptions, the Company expects this plan to be fully funded by 2018.

Also included in marketable securities are investments that are pledged as
collateral with one of the Company's investment managers relating to a
membership seat financing program. Under this program, the investment manager
extends credit to individuals purchasing NYMEX Division memberships. The program
requires that the Company pledge assets to the investment manager in an amount
equal to at least 118% of the loan value. In the event a member defaults on a
loan, the investment manager has the right to seize the Company's collateral for
the amount of the default, and the Company has the right to liquidate the
member's interest in NYMEX Division to reimburse its loss of collateral. At
December 31, 2003, $10.4 million in securities were pledged against the seat
loans.

CLEARINGHOUSE

The Company serves a clearinghouse function, standing as a financial
intermediary on every open futures and options transaction cleared. Through its
clearinghouse, the Company maintains a system of guarantees for performance of
obligations owed to buyers and sellers. This system of guarantees is supported
by several mechanisms, including clearing deposits and guaranty funds posted by
clearing members with the Company's clearinghouse.

The Company is required, under the Commodity Exchange Act, to maintain
separate accounts for cash and securities that are deposited by clearing members
at banks, approved by the Company, as margin for house and customer accounts.
These clearing deposits are used by members to meet their obligations to the
Company for margin requirements on open futures and options positions, as well
as delivery obligations.

Each clearing member firm is required to maintain a security deposit, in
the form of cash or U.S. Treasury securities, ranging from $100,000 to $2.0
million, per division, based upon such clearing member firm's reported
regulatory capital, in a fund known as a guaranty fund. Historically, separate
and distinct guaranty funds were maintained for the NYMEX Division and the COMEX
Division. Effective May 16, 2003, the NYMEX Division assumed all of the clearing
functions of the COMEX Division. Accordingly, the deposits were aggregated and
are now maintained in a single guaranty fund which may be used for any loss
sustained by the Company as a result of the failure of a clearing member to
discharge its obligations on either division. Although there is now one guaranty
fund for both divisions, separate contribution amounts are calculated for each
division.

Every member and non-member executing transactions on the Company's
exchanges must be guaranteed by a clearing member and clear their transactions
through the Company's clearinghouse. This requirement also applies to
transactions conducted outside of the exchange which clear through NYMEX
ClearPort(SM) Clearing. Clearing members of the NYMEX Division and COMEX
Division require their customers to

maintain clearing deposits in accordance with Company margin requirements.
Clearing deposits and guaranty funds are posted by clearing members with the
Company's clearinghouse. In the event of a clearing member default, the Company
satisfies the clearing member's obligations on the underlying contract by
drawing on the defaulting clearing member's clearing deposits and guaranty
funds. If those resources are insufficient, the Company may fund the obligations
from its own financial resources or draw on guaranty funds posted by all
clearing members. During 2003, the Company obtained a $100 million default
insurance policy. This insurance coverage is available to protect the Company
and clearing members in the event that a default in excess of $130 million
occurs which depletes the available guaranty funds and defaulting member
clearing deposits. Additionally, the Company is in the process of obtaining a
line of credit that would provide temporary liquidity, prior to accessing
guaranty funds, in the event of a clearing member's default, and would be
collateralized by clearing deposits and guaranty funds. The Company expects to
put the facility in place during the first half of 2004.

The Company is entitled to earn interest on cash balances posted as
clearing deposits and guaranty funds. Such balances are included in the
Company's consolidated statement of financial condition, and are generally
invested overnight in securities purchased under agreements to resell, the
following table sets forth clearing deposits and guaranty fund balances held by
the Company on behalf of clearing members at December 31, 2003 and 2002 (in
thousands):

TOTAL
RESALE RESALE MONEY U.S. LETTERS OF
CASH AGREEMENTS AND CASH MARKET TREASURIES CREDIT TOTAL FUNDS
---- ---------- -------- ---------- ---------- ---------- -----------

2003
Clearing deposits... $ 67 $92,450 $92,517 $2,099,620 $5,108,929 $408,632 $7,709,698
Guaranty funds...... 81 4,640 4,721 -- 149,911 -- 154,632
---- ------- ------- ---------- ---------- -------- ----------
Total Company....... $148 $97,090 $97,238 $2,099,620 $5,258,840 $408,632 $7,864,330
==== ======= ======= ========== ========== ======== ==========
2002
NYMEX Division
Clearing deposits... $340 $65,935 $66,275 $1,434,975 $2,276,351 $247,580 $4,025,181
Guaranty funds...... -- 105 105 -- 79,721 -- 79,826
---- ------- ------- ---------- ---------- -------- ----------
Total NYMEX......... $340 $66,040 $66,380 $1,434,975 $2,356,072 $247,580 $4,105,007
==== ======= ======= ========== ========== ======== ==========
COMEX Division
Clearing deposits... $ -- $ 8,030 $ 8,030 $ -- $ 937,310 $ 61,150 $1,006,490
Guaranty funds...... -- 917 917 -- 74,437 -- 75,354
---- ------- ------- ---------- ---------- -------- ----------
Total COMEX......... $ -- $ 8,947 $ 8,947 $ -- $1,011,747 $ 61,150 $1,081,844
==== ======= ======= ========== ========== ======== ==========
Total Company....... $340 $74,987 $75,327 $1,434,975 $3,367,819 $308,730 $5,186,851
==== ======= ======= ========== ========== ======== ==========

FUTURE CASH REQUIREMENTS

The Company has three series of unsecured long-term debt, which mature
through 2026. At December 31, 2003, notes payable consisted of the following (in
thousands):

DECEMBER 31,
-----------------
2003 2002
------- -------

Private placement notes
7.48% Senior Notes, Series A, due 2001.................... $22,549 $25,366
7.75% Senior Notes, Series B, due 2021.................... 54,000 54,000
7.84% Senior Notes, Series C, due 2026.................... 15,000 15,000
------- -------
91,549 94,366
Less current maturities................................... (2,817) (2,815)
------- -------
Total long-term debt...................................... $88,732 $91,551
======= =======

Notes payable that become due during the next five years are as follows (in
thousands):

2004........................................................ $2,817
2005........................................................ 2,817
2006........................................................ 2,817
2007........................................................ 2,817
2008........................................................ 2,817

The senior notes are subject to a prepayment penalty in the event they are
paid off prior to their scheduled maturities. The Company believes that any
economic benefits derived from early redemption of these notes would be offset
by the redemption penalty. These notes place certain limitations on the
Company's ability to incur additional indebtedness.

In connection with its operating activities, the Company enters into
certain contractual obligations. The Company's material contractual cash
obligations include long-term debt, operating leases and other contracts.

A summary of the Company's future cash payments associated with its
contractual cash obligations outstanding as of December 31, 2003 as well as an
estimate of the timing in which these commitments are expected to expire are set
forth on the following table below (in thousands):

PAYMENTS DUE BY PERIOD
-------------------------------------------------------
LESS THAN AFTER
CONTRACTUAL OBLIGATIONS 1 YEAR 1-3 YEARS 4-5 YEARS 5 YEARS TOTAL
----------------------- --------- --------- --------- -------- --------

Long-Term Debt Principal................... $ 2,817 $ 5,634 $ 5,634 $ 77,464 $ 91,549
Debt Interest.............................. 6,995 13,358 12,515 53,827 86,695
Operating Leases........................... 5,512 7,386 6,512 14,510 33,920
Other Long-Term Obligations................ 800 1,600 1,600 8,251 12,251
------- ------- ------- -------- --------
Total...................................... $16,124 $27,978 $26,261 $151,052 $224,415
======= ======= ======= ======== ========

See the Notes to the Consolidated Financial Statements.

In December 2003, the Company settled the legal action brought by eSpeed,
Inc., and Electronic Trading Systems Corporation alleging that the Company
infringed, through use of its electronic trading system, upon eSpeed's rights as
the owner of United States Patent No. 4,903,201. Under the settlement agreement,
the Company made an initial payment of $2.0 million in December 2003, and is
required to make three subsequent annual payments of $2.0 million each in
December 2004, 2005 and 2006. The Company had fully reserved for this settlement
and, therefore, these payments will not affect the Company's future consolidated
results of operations.

Other Matters

In February 2004, the Commodity Futures Trading Commission ("CFTC") issued
an order requiring, among other things, that the Company establish and maintain
a permanent retail customer protection mechanism supported by a commitment of
not less than $10 million, which must be available at all times to reimburse
retail customers trading on the Company's exchanges whose original margin might
be lost in the default of another customer of their clearing member. Based on
historical patterns, the Company believes that the likelihood of events that
would require its performance under this CFTC order is remote. Therefore, the
Company has not established, and does not expect in the future to establish, a
liability related to this commitment.

In 2002, the Company received a $5 million cash grant as a result of a
government program to aid those affected by September 11, 2001 terrorist attack.
This grant is subject to certain recapture provisions over a ten-year period,
and is being recognized ratably over the recapture period as a reduction of
occupancy and equipment expense. Based on its expectations as of the date of
this report, the Company expects to meet all requirements of the grant and
retain the entire amount. See Notes to the Consolidated Financial Statements.

RECENT ACCOUNTING PRONOUNCEMENTS AND CHANGES

In June 2001, the Financial Accounting Standards Board, ("FASB") issued
SFAS No. 143, Accounting for Asset Retirement Obligations. This statement,
effective for fiscal years beginning after June 15, 2002, requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement. The
adoption of this Statement did not have an impact on the Company's consolidated
results of operations, financial position or cash flows.

In April 2002, the FASB issued SFAS No. 145, which rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt, SFAS No. 44, Accounting
for Intangible Assets of Motor Carriers, and SFAS No. 64, Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirement. SFAS No. 145 also amends SFAS No.
13, Accounting for Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. As a result of the rescission of SFAS No. 64, the
criteria in APB Opinion No. 30 will be used to classify gains and losses from
debt extinguishment. SFAS No. 145 also amends other existing authoritative
pronouncements to make various technical corrections, clarify meaning, or
describe their applicability under changed conditions. SFAS No. 145 became
effective for the Company as of January 1, 2003. The adoption of SFAS No. 145
did not have a material impact on the Company's consolidated results of
operations, financial position or cash flows.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses financial accounting and
reporting for costs associated with exit or disposal activities, and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring), which previously governed
the accounting treatment for restructuring activities. The adoption of SFAS No.
146 did not have a material impact on the Company's consolidated results of
operations, financial position or cash flows. SFAS No. 146 applies to costs
associated with an exit activity that does not involve an entity newly acquired
in a business combination or with a disposal activity covered by SFAS No. 144.
Those costs include, but are not limited to, the following: (1) termination
benefits under the terms of a benefit arrangement that, in substance, is not an
ongoing benefit arrangement or an individual deferred-compensation contract, (2)
costs to terminate a contract that is not a capital lease, and (3) costs to
consolidate facilities to relocate employees. SFAS No. 146 does not apply to
costs associated with the

retirement of long-lived assets covered by SFAS No. 143. The adoption of SFAS
No. 146 did not have a material impact on the Company's consolidated results of
operations, financial position or cash flows.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This Interpretation elaborates on the
existing disclosure requirements for most guarantees, including loan guarantees,
and standby letters of credit. It also clarifies that at the time a company
issues a guarantee, the company must recognize an initial liability for the fair
market value of the obligations it assumes under that guarantee and must
disclose that information in its interim and annual financial statements. The
initial recognition and measurement provisions of the Interpretation apply on a
prospective basis to guarantees issued or modified after December 31, 2002. The
adoption of FASB Interpretation No. 45 did not have a material impact on the
Company's consolidated results of operations, financial position or cash flows.

In December 2003, the FASB Issued Interpretation No. 46 (revised December
2003), Consolidation of Variable Interest Entities ("FIN 46R"). FIN 46R requires
a company to consolidate a variable interest entity if it is designated as the
primary beneficiary of that entity even if the company does not have a majority
of voting interests. A variable interest entity is generally defined as an
entity that has insufficient equity to finance its activities or the owners of
the entity lack the risk and rewards of ownership. FIN 46R replaces
Interpretation No. 46, Consolidation of Variable Interest Entities, which was
issued in January 2003. The interpretation applies to interests in variable
interest entities or potential variable interest entities commonly referred to
as special-purpose entities for the periods ending after December 15, 2003 and
for all other types of entities in the financial statements for periods ending
after March 15, 2004. The Company does not have any interests that would change
its current reporting entity or require additional disclosure as outlined in FIN
46R.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 is intended to
result in more consistent reporting of contracts as either freestanding
derivative instrument subject to SFAS No. 133 in its entirety, or as hybrid
instrument with debt host contracts and embedded derivative features. In
addition, SFAS No. 149 clarifies the definition of a derivative by providing
guidance on the meaning of initial net investments related to derivatives. This
statement was effective for contracts entered into or modified after June 30,
2003. The adoption of SFAS No. 149 did not have an impact on the Company's
consolidated financial position, results of operation or cash flows.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 was adopted by the Company on July 1, 2003 and did not have an impact on
the Company's consolidated financial position, results of operation or cash
flows.

RECENT DEVELOPMENTS

For a discussion of the Company's recent business developments see Item 1.
Business. Recent Developments.

RESPONSIBILITY FOR FINANCIAL REPORTING

Management is responsible for the preparation, integrity and objectivity of
the audited consolidated financial statements and related notes, and the other
financial information contained in this Annual Report on Form 10-K. Such
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America and are considered by
management to present fairly the Company's consolidated financial position,
results of operations and cash flows. These audited consolidated financial
statements include certain amounts that are based on management's estimates and
judgements, giving due consideration to materiality.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The table below provides information about the Company's marketable
securities, excluding equity securities, and long-term debt including expected
principal cash flows for the years 2004 through 2009 and thereafter (in
thousands). The marketable securities are classified as trading.

PRINCIPAL AMOUNTS BY EXPECTED MATURITY
AT DECEMBER 31, 2003

WEIGHTED
AVERAGE
YEAR PRINCIPAL INTEREST TOTAL INTEREST RATE
---- --------- -------- -------- -------------

ASSETS
MUNICIPAL BONDS
2004.............................................. $ -- $ -- $ --
2005.............................................. 2,355 104 2,459 4.44%
2006.............................................. 6,293 307 6,600 5.03%
2007.............................................. 9,838 457 10,295 4.71%
2008.............................................. 11,375 485 11,860 4.28%
2009 and thereafter............................... 14,784 800 15,584 4.44%
-------- ------- --------
Total............................................. $ 44,645 $ 2,153 $ 46,798
======== ======= ========
Fair Value........................................ $ 61,195
========
LIABILITIES
CORPORATE DEBT
2004.............................................. $ 2,817 $ 6,995 $ 9,812 7.71%
2005.............................................. 2,817 6,784 9,601 7.71%
2006.............................................. 2,817 6,574 9,391 7.72%
2007.............................................. 2,817 6,363 9,180 7.73%
2008.............................................. 2,817 6,152 8,969 7.74%
2009 and thereafter............................... 77,464 53,827 131,291 7.75%
-------- ------- --------
Total............................................. $ 91,549 $86,695 $178,244
======== ======= ========
Fair Value........................................ $118,678
========

INTEREST RATE RISK

Current Assets

The Company maintains cash and short-term investments in an amount
sufficient to meet its working capital requirements. Excess cash on hand is
generally invested overnight in securities purchased under agreements to resell.
Cash that is not required to meet daily working capital requirements is invested
primarily in high-grade tax exempt municipal bonds, and obligations of the
United States government and its agencies. The Company also invests in equity
securities. The Company's investment income consists primarily of interest
income and realized and unrealized gains and losses on the market values of its
investments. Given the composition of its investment portfolio, the Company's
investment income is highly sensitive to fluctuation in interest rates.
Investment income was $4.5 million, $5.7 million and $4.6 million in 2003, 2002
and 2001, respectively. The fair values of the Company's marketable securities,
including equity securities, were $64.9 million and $67.0 million at December
31, 2003 and 2002, respectively. Based on portfolio compositions at December 31,
2002 and 2003, and assuming a 10% change in market values, the Company would
have recognized losses of $6.5 million and $6.7 million, respectively.

Debt

The weighted average interest rate on the Company's long-term debt is
7.73%. The debt contains a redemption premium, the amount of which varies with
changes in interest rates. Therefore, the fair market value of the Company's
long-term debt is highly sensitive to changes in interest rates. Although the
market value of the debt will fluctuate with interest rates, the Company's
interest expense will not vary with changes in market interest rates if the debt
is paid off in accordance with stated principal repayment schedules. As of the
date of this report, the Company does not expect to pay down any series of its
long-term debt prior to stated maturities. However, the Company may pursue
future financing strategies that involve early repayment of its current debt, or
issuance of new debt, potentially increasing its sensitivity to changes in
interest rates.

CREDIT RISK

NYMEX Division bylaws authorize its board of directors to fix the annual
dues of NYMEX Division members and to levy assessments as it determines to be
necessary. Such dues and assessments are payable at such time as NYMEX's board
of directors may determine. The Company's board of directors may waive the
payment of dues by all NYMEX Division members or by individual members as it
determines. COMEX Division provides its board of directors with similar powers
relating to dues, assessments and fees with respect to COMEX Division members,
provided that such dues and assessments (or fee surcharges in lieu thereof) may
not be imposed (other than in connection with certain merger-related events)
without the consent of the COMEX Governors Committee and that the ability of
COMEX's board of directors to impose such fee is subject to the limitations.

The Exchange, as a self-regulatory organization, has instituted detailed
risk-management policies and procedures to guard against default risk with
respect to contracts traded on the Exchange. The Exchange also has extensive
surveillance and compliance operations and procedures to monitor and to enforce
compliance with rules pertaining to the trading, position sizes and financial
condition of members. As described herein, the Exchange has powers and
procedures designed to backstop contract obligations in the event that a
contract default occurs on the Exchange including authority to levy assessments
on any of its clearing members if, after a default by another clearing member,
there are insufficient funds available to cover a deficit. The maximum
assessment on each clearing member is the lesser of $30 million and 40% of such
clearing member's capital.

Despite the Company's authority to levy assessments or impose fees, there
can be no assurance that the relevant members will have the financial resources
available to pay, or will not choose to be expelled from membership rather than
pay, any dues, fees or assessments. The Company believes that assessment
liabilities of a member arising prior to expulsion are contractual in nature
and, accordingly, survive expulsion. In addition, the Exchange would have
recourse to such member and the proceeds from the Company's sale of such
member's seat to apply towards any outstanding obligations to the Exchange of
such member. Recourse to a member's seat, however, may not be of material value
in the case of large defaults that result in assessments greater in value than
the seat, particularly when the seat value declines markedly in price as a
consequence of the default.

Moreover, despite the risk mitigation techniques adopted by, and the other
powers and procedures implemented by the Company, which are designed to, among
other things, minimize the potential risks associated with the occurrence of
contract defaults on the Company, there can be no assurance that these powers
and procedures will prevent contract defaults or will otherwise function to
preserve the liquidity of the Company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See Index to Financial Information in Item 15 of this Annual Report on Form
10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There were no reports on Form 8-K required to be filed under Item 304 of
Regulation S-K during the year ended December 31, 2003.

During the two most recent fiscal years and the subsequent interim period
through December 31, 2003, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1)(v)) of the Company.

ITEM 9A. CONTROLS AND PROCEDURES.

(1) Evaluation of Disclosure Controls and Procedures. Our Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of our
disclosure controls and procedures (as such term is defined in Rules 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of a date within 90 days prior to the filing date of this
Annual Report on Form 10-K (the "Evaluation Date"). Based upon such evaluation,
such officers have concluded that, as of the Evaluation Date, our disclosure
controls and procedures are effective in alerting them on a timely basis to
material information relating to the Company that is required to be included in
our annual filing under such Exchange Act.

(2) Changes in Internal Controls. Since the Evaluation Date, there have
not been any significant changes in our internal controls or in other factors
that could significantly affect such controls.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND THE EXCHANGE.

Set forth below are: (1) the names and ages of all directors (including
directors who are also executive officers) of the Company at March 4, 2004, (2)
all positions with the Company presently held by each such person and (3) the
positions held by, and principal areas of responsibility of, each such person
during the last five years.

TERM
EXPIRATION
NAME OF DIRECTOR AND OFFICER DATE
---------------------------- ----------

Vincent Viola........................ 48 Chairman 2004
Mitchell Steinhause.................. 56 Vice Chairman 2005
Richard Schaeffer.................... 51 Director, Treasurer 2005
Gary Rizzi........................... 49 Director, Secretary 2004
Stephen Ardizzone.................... 42 Director 2006
Eric Bolling......................... 42 Director 2005
Joseph Cicchetti..................... 51 Director 2005
John Conheeney....................... 74 Public Director 2006
Joel Faber........................... 63 Director 2006
Melvyn Falis......................... 63 Public Director 2005
Stephen Forman....................... 48 Director 2004
Kenneth Garland...................... 55 Director 2004
Anthony George Gero.................. 67 Director 2005
David Greenberg...................... 39 Director 2006
E. Bulkeley Griswold................. 65 Public Director 2006
Jesse B. Harte....................... 45 Director 2006
Scott Hess........................... 46 Director 2006
Steven Karvellas..................... 44 Director 2005
Harley Lippman....................... 49 Public Director 2004
Michel Marks......................... 54 Director 2004
Kevin McDonnell...................... 44 Director 2005
John McNamara........................ 47 Director 2006
Gordon Rutledge...................... 50 Director 2004
Robert Steele........................ 65 Public Director 2004
J. Robert Collins, Jr. .............. 38 President
Christopher K. Bowen, Esq. .......... 43 General Counsel and Chief Administrative
Officer
Madeline J. Boyd..................... 51 Senior Vice President -- Government, Community
and Philanthropic Affairs
Samuel H. Gaer....................... 37 Senior Vice President and Chief Information
Officer
Nachamah Jacobovits.................. 41 Senior Vice President -- Corporate
Communications
Thomas F. LaSala..................... 42 Senior Vice President -- Compliance and Risk
Management
Robert Levin......................... 48 Senior Vice President -- Planning and
Development
Lewis A. Raibley, III................ 42 Senior Vice President -- Finance and Chief
Financial Officer
Stuart A. Smith...................... 56 Senior Vice President -- Operations

The Board of Directors of the Company is comprised of 25 members. There is
currently one vacancy on the Board which will be filled at the 2004 annual
election.

MEMBERS OF THE BOARD OF NYMEX HOLDINGS, INC.

The information in the Proxy Statement, dated March 5, 2004 set forth under
the caption "Information Regarding the Current Board of Directors" is
incorporated herein by reference.

BOARD MEETINGS AND COMMITTEES

The information in the Proxy Statement, dated March 5, 2004 set forth under
the caption "Board Meetings and Committees" is incorporated herein by reference.

Set forth below are: (1) the names and ages of all executive officers
(including executive officers who are also directors) of the Company at March 4,
2004, (2) all positions with the Company presently held by each such person, and
(3) the positions held by, and principal areas of responsibility of, each such
person during the last five years. Information for the Company's Directors is
incorporated by reference to the Proxy Statement.

NAME POSITION(S) HELD AGE
---- ---------------- ---

VINCENT VIOLA CHAIRMAN 48

Mr. Viola was elected Chairman in 2001. In 1985, Mr. Viola founded Pioneer
Futures, Inc., a clearing member of NYMEX Exchange, COMEX and the New York Board
of Trade. In 1987, Mr. Viola formed the First Bank Group that operates community
banks in Dallas and the surrounding Texas area. From 1993 to 1996 he served as
Vice Chairman of the Board of NYMEX Exchange. During his tenure, Mr. Viola
served as chairman of the strategic planning committee and was instrumental in
developing the NYMEX ACCESS(R) electronic trading platform. In 1990, he formed a
proprietary futures and options trading group on NYMEX Exchange and the
International Petroleum Exchange.

MITCHELL STEINHAUSE VICE CHAIRMAN 56

Mr. Steinhause was elected Vice Chairman of the Board in March 2000. He is
presently a local trader. He has previously served as Corporate Secretary from
1996 to 1998 and has been a member of NYMEX Exchange since 1975 as both a floor
broker and a local trader.

RICHARD SCHAEFFER TREASURER 51

Mr. Schaeffer has been an executive of Global Energy Futures for ABN AMRO,
Inc. since 1997. Mr. Schaeffer has been the NYMEX Division's Treasurer since
March 1993. From 1992 to 1997, Mr. Schaeffer had been a Senior Vice
President/Director of the Chicago Corp., which was a clearing member of both
NYMEX Exchange and the COMEX Division until its buy-out by ABN AMRO, Inc. He is
also a member of the Board of Directors of the Juvenile Diabetes Foundations.

GARY RIZZI SECRETARY 49

Mr. Rizzi has been the Company's Secretary since 2001. He has been a
director since 1995. Mr. Rizzi has been a Vice President of AGE Commodity
Clearing Corp. (now known as A.G. Edwards & Sons, Inc. since January 2004) since
2001 and was an Associate Vice President from 1985 to 2001. Mr. Rizzi has served
on the Executive Committee since 2000. He is also a member of the COMEX Division
and both divisions of the New York Board of Trade.

J. ROBERT COLLINS, JR. PRESIDENT 38

Mr. Collins was appointed President of NYMEX Holdings and NYMEX Exchange on
July 23, 2001. Mr. Collins was Senior Vice President of natural gas trading at
El Paso Merchant Energy-Gas, L.P., a division of El Paso Energy Corp. Mr.
Collins directed the natural gas derivatives portfolio. Before joining El Paso
in

1997, Mr. Collins was a natural gas and crude oil options market maker with
Pioneer Futures, Inc. on the floor of NYMEX Exchange. Mr. Collins had been a
director in 2001 and a member of NYMEX Exchange since 1996.

CHRISTOPHER K. BOWEN GENERAL COUNSEL AND CHIEF ADMINISTRATIVE 43
OFFICER

Mr. Bowen was appointed General Counsel and Chief Administrative Officer of
NYMEX Holdings and NYMEX Exchange in February 2002. Mr. Bowen has served as
Senior Vice President and General Counsel of NYMEX Holdings since 2000 and has
been Senior Vice President and General Counsel of the NYMEX Exchange since 1997.
Mr. Bowen has held positions of Associate General Counsel and Senior Associate
General Counsel. He has also served as Counsel/Manager of Futures Compliance at
Morgan Stanley & Co., Inc. and as an attorney at the CFTC. Mr. Bowen also serves
as General Counsel and Chief Administrative Officer of COMEX.

MADELINE J. BOYD SENIOR VICE PRESIDENT - GOVERNMENT, 51
COMMUNITY AND PHILANTHROPIC AFFAIRS

Ms. Boyd was appointed Senior Vice President - Government, Community, and
Philanthropic Affairs of NYMEX Holdings and NYMEX Exchange in January 2004. Ms.
Boyd was a member of NYMEX Exchange from 1984 to 2004. Ms. Boyd also served on
the Board of Directors of NYMEX Exchange from 1998 to 2004 and of the Company
from 2000 to 2004, including service on the Executive Committee from 2000-200l.
Ms. Boyd is the Chairman of the NYMEX Charitable Assistance Fund. Ms. Boyd has
also served as Chairman of the New York Mercantile Exchange Charitable
Foundation Committee and Government Relations Committee. Ms. Boyd also serves as
Senior Vice President - Government, Community, and Philanthropic Affairs of
COMEX.

SAMUEL H. GAER SENIOR VICE PRESIDENT AND CHIEF 37
INFORMATION OFFICER

Mr. Gaer was appointed Senior Vice President and Chief Information Officer
of NYMEX Holdings and NYMEX Exchange in March 2003. Mr. Gaer has been involved
with the commodities business since he was fifteen, starting as a clerk on the
COMEX floor. Mr. Gaer became a member of COMEX in 1988. In 1991 he formed Uptick
Trading, which merged into Millennium Copper Group, LLC in 1993. Mr. Gaer left
the trading floor in 1998 to devote more time to trading software development
and architecture, and subsequently founded TradinGear.com, a trading software
development company. Mr. Gaer also serves as the Senior Vice President and Chief
Information Officer of COMEX.

NACHAMAH JACOBOVITS SENIOR VICE PRESIDENT - CORPORATE 41
COMMUNICATIONS

Ms. Jacobovits is Senior Vice President of Corporate Communications for
NYMEX Holdings and NYMEX Exchange, a position she has held since September 2002.
Ms. Jacobovits joined the Exchange in 1989 and has served as manager of media
relations as well as director and, most recently, vice president of corporate
communications. She is currently the secretary and board member of the New York
Mercantile Exchange Charitable Assistance Fund. Ms. Jacobovits also serves as
Senior Vice President of Corporate Communications for COMEX.

THOMAS F. LASALA SENIOR VICE PRESIDENT - COMPLIANCE AND 42
RISK MANAGEMENT

Mr. LaSala was appointed Senior Vice President - Compliance and Risk
Management of NYMEX Holdings and NYMEX Exchange in February 2002. Mr. LaSala
previously served as Vice President -

Compliance of NYMEX Holdings since 2000 and NYMEX Exchange since 1994. Mr.
LaSala also serves as Senior Vice President - Compliance and Risk Management of
COMEX.

ROBERT LEVIN SENIOR VICE PRESIDENT - PLANNING AND 48
DEVELOPMENT

Mr. Levin serves as Senior Vice President - Planning and Development of
NYMEX Holdings and has been Senior Vice President - Planning and Development of
NYMEX Exchange since June 1993. Mr. Levin was Vice President - Product
Development of NYMEX Exchange from July 1991 until June 1993. Mr. Levin also
currently serves as Senior Vice President - Planning and Development of COMEX.

LEWIS A. RAIBLEY, III SENIOR VICE PRESIDENT OF FINANCE AND CHIEF 42
FINANCIAL OFFICER

Mr. Raibley serves as Senior Vice President - Finance and Chief Financial
Officer of NYMEX Holdings and NYMEX Exchange since January 2003. Mr. Raibley has
served as Senior Vice President and Controller at Datek Online Holdings Corp.
from 2000 to 2002 and served in several senior financial roles at Morgan Stanley
Dean Witter & Co., where he was employed from 1986 to 2000. Mr. Raibley also
currently serves as Senior Vice President - Finance and Chief Financial Officer
of COMEX.

STUART A. SMITH SENIOR VICE PRESIDENT - OPERATIONS 56

Mr. Smith serves as Senior Vice President - Operations of NYMEX Holdings
and has been Senior Vice President - Operations of the NYMEX Exchange since May
1992. Mr. Smith currently serves as Senior Vice President - Operations of COMEX.
Mr. Smith previously served as Vice President of Trading Floor Operations from
1986 to 1996.

None of the directors, except for the Chairman, currently is or has ever
been an officer or employee of the Company or any of its subsidiaries, nor were
there any compensation committee interlocks or other relationships during 2003
requiring disclosure under item 402(j) of Regulation S-K of the SEC.

CODE OF ETHICS

ITEM 11. EXECUTIVE OFFICER COMPENSATION.

The information in the Proxy Statement, dated March 5, 2004, set forth
under the captions "Executive Officer Compensation" and "Information Regarding
the Current Board of Directors" and "Compensation of Directors" is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information set forth under the caption "Information Regarding
Beneficial Ownership of Principal Shareholders, Directors, and Management" of
the Proxy Statement, dated March 5, 2004, is incorporated herein by reference.

ITEM 13. CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS.

business with the Exchange. The Board establishes fees and usage charges and
also determines the level of payments under any proprietary fee reduction or
other cost reduction programs.

The following are descriptions of material transactions involving the
Company and its directors:

Several of the Company's directors serve as officers or directors of
clearing member firms. These clearing member firms pay substantial fees to the
Company's clearinghouse in connection with services the Company provides. The
Company believes that the services provided to these clearing firms are on terms
no more favorable to those firms than terms given to other member firms and
individual members.

Pioneer Futures, Inc. ("Pioneer"), of which Vincent Viola the Chairman of
the Board of the Company is the sole shareholder, is one of the largest clearing
members with whom the Company does business. For the year ended December 31,
2003, a total of $9.2 million in revenue was derived from Pioneer from clearing
and transaction fees and $0.7 million was derived from rental income. These
amounts represent 5% of the Company's total consolidated revenue.

Sterling Commodities Corp. ("Sterling"), of which David Greenberg, a
director of the Company, is the President, currently leases from NYMEX Exchange
space at the One North End Avenue facility. The lease expires on November 30,
2007. The aggregate amount of rent collected from Sterling during 2003 was
$242,000. The director's father is Chief Executive Officer and 100% owner of
Sterling. The clearing revenues earned from Sterling in 2003 were approximately
$1.6 million representing approximately 1% of the Company's consolidated
revenues.

ABN-AMRO, Inc. ("ABN-AMRO"), of which Richard Schaeffer, the Treasurer of
the Company, is an executive, currently leases from NYMEX Exchange space at the
One North End Avenue facility. ABN-AMRO currently has two leases, one of which
had a three-month rent free period. The aggregate amount of rent collected from
ABN-AMRO during 2003 was $72,390.

On January 27, 2003, a wholly-owned subsidiary of the Company, Tradingear
Acquisition LLC, entered into an Asset Purchase Agreement with TGFIN Holdings,
Inc. ("TGFIN") and its operating subsidiary, TradinGear.com. Pursuant to this
agreement, TGFIN and TradinGear.com were paid $3 million for certain assets,
including certain tangible assets and software which the Company had previously
been licensing from TradinGear.com. This transaction closed on March 31, 2003.
On April 2, 2003, Samuel Gaer, Chairman and CEO of TGFIN, became Senior Vice
President and Chief Information Officer of the Company. Prior to that date, Mr.
Gaer received approximately $82,500 in consulting fees from the Company in 2003.
Mr. Gaer subsequently resigned his position as an officer and director of TGFIN.
Mr. Gaer, together with his family, owned at the time of the acquisition and
continue to own approximately 38% of the stock of TGFIN.

The Company had invested assets segregated for the benefit of the COMEX
Members' Recognition and Retention Plan of $11.7 million at December 31, 2003,
in a portfolio of fixed income securities managed by a major securities firm of
which Anthony George Gero, a director of the Company, is a senior investment
officer.

The Company has provided financial guarantees and pledged collateral
relating to a membership seat financing program with one of its banks. Pursuant
to this program, the member remains primarily liable for the loan that is used
to purchase an interest in the Company. The Company's guarantee is limited by a
specified dollar amount, and the Company has the right to liquidate the interest
if the member defaults on the loan. As of December 31, 2003, the following
director had a loan balance relating to this program in excess of $60,000:
Steven Karvellas $76,000.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information in the 2003 Proxy Statement set forth under the captions
"Audit and Non-Audit Fees" and "Policy on Audit Committee Pre-Approval of Audit
and Permissible Non-Audit Services of the Independent Auditor" is incorporated
herein by reference.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.

(a) Documents filed as part of this Report:

1. Consolidated Financial Statements

The consolidated financial statements required to be filed in
this Annual Report on Form 10-K are listed on page F-1 hereof and
incorporated herein by reference.

2. Financial Statement Schedules

Financial statement schedules have been omitted because the
information required to be set forth in those schedules is not
applicable or is shown in the consolidated financial statements or
notes thereto.

3. Exhibits

Certain of the following exhibits were previously filed as
exhibits to other reports or registration statements filed by NYMEX
Holdings and are incorporated herein by reference to such reports or
registration statements as indicated parenthetically below by the
appropriate report reference date or registration statement number.

EXHIBITS

2.2 Form of Agreement and Plan of Merger by and among New York
Mercantile Exchange, Inc., NYMEX Holdings, Inc. and NYMEX
Merger Sub, Inc. (incorporated herein by reference to
Exhibit 2.2 of Form S-4 (file no. 333-30332)).
3.1 Amended and Restated Certificate of Incorporation of NYMEX
Holdings, Inc. (incorporated herein by reference to Exhibit
3.1 of Form 10-K for the year 2000 (file no. 333-30332)).
3.2 Bylaws of NYMEX Holdings, Inc. (incorporated herein by
reference to Exhibit 3.2 of Form S-4 (file no. 333-30332)).
4 Note Purchase Agreement among NYMEX and each of Purchasers
listed in Schedule A attached thereto dated October 15, 1996
(incorporated herein by reference to Exhibit 10.5 of Form
S-4 (file no. 333-30332)).
10.1 NYMEX Amended and Restated Members' Retention and Retirement
Plan effective December 31, 1998 (incorporated herein by
reference to Exhibit 10.1 of Form S-4 (file no. 333-
30332)).
10.2 Trust under the NYMEX Members' Retention and Retirement Plan
dated December 31, 1998 (incorporated herein by reference to
Exhibit 10.2 of Form S-4 (file no. 333-30332)).
10.3 Ground Lease between Battery Park City Authority and NYMEX
dated May 18, 1995 (incorporated herein by reference to
Exhibit 10.3 of Form S-4 (file no. 333-30332)).
10.4 Funding Agreement among New York State Urban Development
Corporation, Battery Park City Authority and NYMEX dated May
18, 1995 (incorporated herein by reference to Exhibit 10.4
of Form S-4 (file no. 333-30332)).
10.5 NYMEX Holdings, Inc. Executive Income Deferral Program
(incorporated herein by reference to Exhibit 10.5 of Form
10-K for the year 2000 (file no. 333-30332)).
10.6 Network License Order Form between Oracle Corporation and
NYMEX, accompanying Payment Plan Agreement and Payment
Schedule between Oracle Credit Corporation and NYMEX
(incorporated herein by reference to Exhibit 10.6 of Form
S-4 (file no. 333-30332)).

10.7 Network License Order Form between Oracle Corporation and NYMEX, accompanying Payment Schedule between
Oracle Credit Corporation and NYMEX and Amendment 1 to the Network License Order Form (incorporated
herein by reference to Exhibit 10.7 of Form S-4 (file no. 333-30332)).
10.8 Network License Order Form between Oracle Corporation and NYMEX and accompanying Payment Schedule
between Oracle Credit Corporation and NYMEX (incorporated herein by reference to Exhibit 10.8 of Form
S-4 (file no. 333-30332)).
10.8.1 Software License and Services Agreement between Oracle Corporation and NYMEX effective January 6, 1995
(incorporated herein by reference to Exhibit 10.8.1 of Form S-4 (file no. 333-30332)).
10.9 Smartnet Agreement between Cisco Systems, Inc. and NYMEX dated May 21, 1996 (incorporated herein by
reference to Exhibit 10.9 of Form S-4 (file no. 333-30332)).
10.10 Network Supported Account Agreement between Cisco Systems, Inc. and NYMEX dated May 21, 1996
(incorporated herein by reference to Exhibit 10.10 of Form S-4 (file no. 333-30332)).
10.11 COMEX Members' Recognition and Retention Plan (incorporated herein by reference to Exhibit 10.11 of Form
10-K for the year 2000 (file no. 333-30332)).
10.12.1 Employment Agreement between NYMEX Holdings and Neal L. Wolkoff, Esq. (incorporated herein by reference
to Exhibit 10.12 of Form 10-K for the year 2000 (file no. 333-30332)).
10.12.2 Employment Agreement between NYMEX Holdings, New York Mercantile Exchange, Inc. and J. Robert Collins,
Jr. (incorporated herein by reference to Exhibit 10.13 of Form 10-Q for the quarter ending March 31,
2002) (file no. 333-30332)).
10.12.3 Employment agreement between NYMEX Holdings, and Samuel H. Gaer (incorporated herein by reference to
Exhibit 10.14 of Form 10-Q for the quarter ending March 31, 2003) (file no. 333-30332)).
14 Code of Ethics for principal executive officer and senior financial officers.
21.1 Subsidiaries of NYMEX Holdings, Inc. (incorporated herein by reference to Exhibit 21.1 of Form S-4 (file
no. 333-30332)).
31.0 Certifications of Chairman and Chief Financial Officer pursuant to sec. 302 of the Sarbanes-Oxley Act of
2002.
32.0 Certifications of Chairman and Chief Financial Officer pursuant to sec. 906 of the Sarbanes-Oxley Act of
2002.
99 Published report regarding the demutualization vote by Security holders on June 20, 2000 (incorporated
herein by reference to Exhibit 99 of Form 10-K for the year 2000 (file no. 333-30332)).

(b) Reports on Form 8-K

NYMEX Holdings, Inc. filed a Current Report on Form 8-K, dated March 6,
2003, reporting that our Annual Report on Form 10-K was accompanied by
certifications of our Company's Chairman and Chief Financial Officer, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

NYMEX Holding, Inc. filed a Current Report on Form 8-K, dated May 15, 2003,
reporting that our First Quarter Form 10-Q was accompanied by certifications of
our Company's Chairman and Chief Financial Officer, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, NYMEX Holdings, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 4, 2004

NYMEX HOLDINGS, INC.

BY: /s/ VINCENT VIOLA
------------------------------------
VINCENT VIOLA
Chairman of the Board of Directors
(Principal Executive Officer)

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF NYMEX HOLDINGS,
INC. AND IN THE CAPACITIES AND ON THE DATE INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ VINCENT VIOLA Chairman of the Board March 4, 2004
-----------------------------------------------------
VINCENT VIOLA

/s/ MITCHELL STEINHAUSE Vice Chairman March 4, 2004
-----------------------------------------------------
MITCHELL STEINHAUSE

/s/ RICHARD SCHAEFFER Treasurer March 4, 2004
-----------------------------------------------------
RICHARD SCHAEFFER

/s/ GARY RIZZI Secretary March 4, 2004
-----------------------------------------------------
GARY RIZZI

/s/ ERIC BOLLING Director March 4, 2004
-----------------------------------------------------
ERIC BOLLING

/s/ STEPHEN ARDIZZONE Director March 4, 2004
-----------------------------------------------------
STEPHEN ARDIZZONE

/s/ JOSEPH CICCHETTI Director March 4, 2004
-----------------------------------------------------
JOSEPH CICCHETTI

/s/ JOHN CONHEENEY Director March 4, 2004
-----------------------------------------------------
JOHN CONHEENEY

/s/ JOEL FABER Director March 4, 2004
-----------------------------------------------------
JOEL FABER

/s/ MELVYN FALIS Director March 4, 2004
-----------------------------------------------------
MELVYN FALIS

/s/ STEPHEN FORMAN Director March 4, 2004
-----------------------------------------------------
STEPHEN FORMAN

/s/ KENNETH GARLAND Director March 4, 2004
-----------------------------------------------------
KENNETH GARLAND

SIGNATURE TITLE DATE
--------- ----- ----

/s/ ANTHONY GEORGE GERO Director March 4, 2004
-----------------------------------------------------
ANTHONY GEORGE GERO

/s/ DAVID GREENBERG Director March 4, 2004
-----------------------------------------------------
DAVID GREENBERG

/s/ E. BULKELEY GRISWOLD Director March 4, 2004
-----------------------------------------------------
E. BULKELEY GRISWOLD

/s/ JESSE B. HARTE Director March 4, 2004
-----------------------------------------------------
JESSE B. HARTE

/s/ SCOTT HESS Director March 4, 2004
-----------------------------------------------------
SCOTT HESS

/s/ STEVEN KARVELLAS Director March 4, 2004
-----------------------------------------------------
STEVEN KARVELLAS

/s/ HARLEY LIPPMAN Director March 4, 2004
-----------------------------------------------------
HARLEY LIPPMAN

/s/ MICHEL MARKS Director March 4, 2004
-----------------------------------------------------
MICHEL MARKS

/s/ KEVIN MCDONNELL Director March 4, 2004
-----------------------------------------------------
KEVIN MCDONNELL

/s/ JOHN MCNAMARA Director March 4, 2004
-----------------------------------------------------
JOHN MCNAMARA

/s/ GORDON RUTLEDGE Director March 4, 2004
-----------------------------------------------------
GORDON RUTLEDGE

/s/ ROBERT STEELE Director March 4, 2004
-----------------------------------------------------
ROBERT STEELE

/s/ J. ROBERT COLLINS, JR. President March 4, 2004
-----------------------------------------------------
J. ROBERT COLLINS, JR.

/s/ LEWIS A. RAIBLEY, III Senior Vice President March 4, 2004
----------------------------------------------------- Finance and Chief
LEWIS A. RAIBLEY, III Financial Officer

/s/ KENNETH D. SHIFRIN Controller March 4, 2004
-----------------------------------------------------
KENNETH D. SHIFRIN

NYMEX HOLDINGS, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K

FISCAL YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

NYMEX HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL INFORMATION
ITEM 15(A)

ITEM 15(A) FINANCIAL STATEMENTS.

Management's Responsibility for Financial Statements........ F-2
Report of Independent Auditors, KPMG LLP.................... F-3
Report of Independent Auditors, Ernst & Young LLP........... F-4
Consolidated Balance Sheets at December 31, 2003 and 2002... F-5
Consolidated Statements of Income for the years ended
December 31, 2003, 2002 and 2001.......................... F-6
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2003, 2002 and 2001.............. F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001.......................... F-8
Notes to Consolidated Financial Statements.................. F-9

All other financial statements and schedules have been omitted since the
required information is not applicable or is included in Item
15(a) -- Consolidated Financial Statements.

F-1

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

To Our Stockholders:

Management is responsible for the reliability of the consolidated financial
statements and related notes. The financial statements were prepared in
conformity with accounting principles generally accepted in the United States of
America and include amounts based upon our estimates and assumptions, as
required. The consolidated financial statements for the year ended December 31,
2003 have been audited by our independent auditors, KPMG LLP, who were given
free access to all financial records and related data, including minutes of the
meetings of the Board of Directors and Committees of the Board. We believe that
our representations to the independent auditors are valid and appropriate.

Management maintains a system of internal accounting controls designed to
provide reasonable assurance as to the reliability of the financial statements,
as well as to safeguard assets from unauthorized use or disposition. The system
is supported by formal policies and procedures. Our internal audit function
monitors and reports on the adequacy of and compliance with the internal control
system, and appropriate actions are taken to address significant control
deficiencies and other opportunities for improving the system as they are
identified. The Audit Committee consists of the five Public Directors of the
Board. One of the Public Directors serves as chairman of the committee. The
Audit Committee meets several times each year with representatives of
management, including the Chief Financial Officer, the Vice President of
Internal Audit and the independent auditors to review the financial reporting
process and controls in place to safeguard assets. Both our independent auditors
and internal auditor have unrestricted access to the Audit Committee.

Although no cost-effective internal control system will preclude all errors
or fraud, we believe our controls as of December 31, 2003 provide reasonable
assurance that the consolidated financial statements are reliable and that our
assets are reasonably safeguarded.

/s/ VINCENT VIOLA
--------------------------------------
Chairman of the Board

/s/ J. ROBERT COLLINS, JR.
--------------------------------------
President

/s/ LEWIS A. RAIBLEY, III
--------------------------------------
Senior Vice President -- Finance
Chief Financial Officer

Date: March 4, 2004
-----------------------------------

F-2

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of NYMEX Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of NYMEX Holdings,
Inc. and subsidiaries (the "Company") as of December 31, 2003 and 2002 and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. The
Company's consolidated statements of income, stockholders' equity and cash flows
for the year ended December 31, 2001, were audited by other auditors whose
report dated March 3, 2002, expressed an unqualified opinion on those
consolidated financial statements.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of NYMEX
Holdings, Inc. and subsidiaries at December 31, 2003 and 2002 and the results of
their operations, and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.

As discussed in note 1 to the consolidated financial statements, in 2002 the
Company changed its methods of accounting for goodwill and other intangible
assets and accounting for the impairment or disposal of long-lived assets.

KPMG LLP

New York, New York
March 1, 2004

F-3

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of NYMEX Holdings, Inc.:

We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of NYMEX Holdings, Inc. and subsidiaries
(the "Company") for the year ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of NYMEX Holdings, Inc. and subsidiaries for the year ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America.

ERNST & YOUNG LLP

New York, New York
March 3, 2002

F-4

NYMEX HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

DECEMBER 31,
-------------------
2003 2002
-------- --------

ASSETS
Cash and cash equivalents................................... $ 1,763 $ 1,014
Securities purchased under agreements to resell............. 45,050 40,760
Marketable securities, at market............................ 64,885 66,976
Clearing and transaction fees receivable, net of
allowance................................................. 13,277 13,884
Prepaid taxes and expenses.................................. 4,115 3,595
Deferred tax assets......................................... 4,134 3,233
Clearing deposits and guaranty funds........................ 97,238 75,327
Other current assets........................................ 8,959 7,920
-------- --------
Total current assets...................................... 239,421 212,709
Property and equipment, net................................. 208,787 223,878
Goodwill, net............................................... 16,329 16,329
Other assets................................................ 13,139 9,839
-------- --------
TOTAL ASSETS................................................ $477,676 $462,755
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities.................... $ 10,773 $ 16,036
Accrued salaries and related liabilities.................... 4,292 5,611
Clearing deposits and guaranty funds........................ 97,238 75,327
Income taxes payable........................................ 10,364 4,335
Other current liabilities................................... 17,126 18,389
-------- --------
Total current liabilities................................. 139,793 119,698
Deferred tax liabilities.................................... 5,961 9,622
Notes payable............................................... 88,732 91,551
Deferred credit -- grant for building construction.......... 112,600 114,745
Retirement benefit obligation............................... 11,729 11,037
Other non-current liabilities............................... 13,446 14,567
-------- --------
Total liabilities......................................... 372,261 361,220
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 17)
STOCKHOLDERS' EQUITY:
Common stock, at $0.01 par value, 816 shares authorized,
issued and outstanding at December 31, 2003 and 2002...... -- --
Additional paid-in capital.................................. 93,312 93,312
Retained earnings........................................... 12,103 8,223
-------- --------
Total stockholders' equity................................ 105,415 101,535
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $477,676 $462,755
======== ========

The accompanying notes are an integral part of these statements.
F-5

NYMEX HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31,
------------------------------
2003 2002 2001
-------- -------- --------

OPERATING REVENUES:
Clearing and transaction fees, net of member fee rebates
of $14,049, $5,245 and $6,693 in 2003, 2002 and 2001,
respectively........................................... $139,731 $140,763 $104,302
Market data fees.......................................... 31,700 33,459 34,313
Other, net of rebates of $995, $1,195, and $2,090 in 2003,
2002 and 2001, respectively............................ 12,737 14,982 5,666
-------- -------- --------
Total operating revenues............................... 184,168 189,204 144,281
-------- -------- --------
OPERATING EXPENSES:
Salaries and employee benefits............................ 54,401 49,121 50,443
Occupancy and equipment................................... 26,664 24,364 20,663
Depreciation and amortization of property and equipment,
net of deferred credit amortization.................... 24,679 20,926 16,024
General and administrative................................ 23,314 17,737 12,848
Professional services..................................... 17,427 17,954 12,753
Telecommunications........................................ 5,934 7,639 10,878
Marketing................................................. 2,080 2,633 1,721
Other expenses............................................ 8,652 9,445 7,203
Amortization of goodwill.................................. -- -- 2,153
Impairment and disposition loss on capitalized software
and computer equipment................................. 2,340 12,583 5,114
-------- -------- --------
Total operating expenses............................... 165,491 162,402 139,800
-------- -------- --------
INCOME FROM OPERATIONS...................................... 18,677 26,802 4,481
OTHER INCOME (EXPENSES):
Investment income, net.................................... 4,501 5,714 4,643
Interest expense.......................................... (7,237) (7,455) (7,662)
-------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES.................... 15,941 25,061 1,462
PROVISION FOR INCOME TAXES.................................. 7,061 12,762 782
-------- -------- --------
NET INCOME.................................................. $ 8,880 $ 12,299 $ 680
======== ======== ========
BASIC AND DILUTED EARNINGS PER SHARE........................ $ 10,882 $ 15,072 $ 833
======== ======== ========
Weighted average common shares outstanding, basic and
diluted................................................... 816 816 816
======== ======== ========

The accompanying notes are an integral part of these statements.
F-6

NYMEX HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)

COMMON STOCK
-------------------- ADDITIONAL TOTAL
SHARES PAID-IN RETAINED STOCKHOLDERS'
OUTSTANDING AMOUNT CAPITAL EARNINGS EQUITY
----------- ------ ---------- -------- -------------

Balances at December 31, 2000......... 816 $ -- $84,415 $ 244 $ 84,659
Net income............................ -- -- -- 680 680
Tax benefit related to:
NYMEX MRRP.......................... -- -- 5,728 -- 5,728
COMEX MRRP.......................... -- -- 3,169 -- 3,169
----------- ------ ------- ------- --------
Balances at December 31, 2001......... 816 -- 93,312 924 94,236
Net income............................ -- -- -- 12,299 12,299
Dividends............................. -- -- -- (5,000) (5,000)
----------- ------ ------- ------- --------
Balances at December 31, 2002......... 816 -- 93,312 8,223 101,535
Net income............................ -- -- -- 8,880 8,880
Dividends............................. -- -- -- (5,000) (5,000)
----------- ------ ------- ------- --------
Balances at December 31, 2003......... 816 $ -- $93,312 $12,103 $105,415
=========== ====== ======= ======= ========

The accompanying notes are an integral part of these statements.
F-7

NYMEX HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
2003 2002 2001
--------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 8,880 $ 12,299 $ 680
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property and
equipment, net of deferred credit.................... 24,679 20,926 16,024
Amortization of goodwill............................... -- -- 2,153
Deferred tax asset (liability)......................... (4,562) (3,674) 3,546
Loss on disposition of property, equipment............. 2,340 12,583 5,114
Curtailment gain on postretirement plan................ -- -- (732)
(Increase) decrease in operating assets
Marketable securities................................ 2,091 (1,555) 12,603
Clearing and transaction fees receivable............. 607 (4,547) (1,762)
Prepaid taxes and expenses........................... (520) 9,390 (2,789)
Clearing deposits and guaranty funds................. (21,911) (28,572) 67,961
Other current assets................................. (1,771) 6,796 (5,074)
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities............. (5,263) (4,871) 9,622
Accrued salaries and related liabilities............. (1,319) 390 1,352
Clearing deposits and guaranty funds................. 21,911 28,572 (67,961)
Other current liabilities............................ 1,237 4,991 498
Income tax payable................................... 6,029 4,335 --
Other non-current liabilities........................ (1,121) 5,233 169
Distributions under NYMEX Division members' retention
and retirement plan............................... -- -- (33,221)
Subordinated commitment for COMEX members' retention
and retirement plan............................... 692 1,258 566
-------- -------- --------
Net cash provided by operating activities............ 31,999 63,554 8,749
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in securities purchased under
agreements to resell................................... (4,290) (34,260) 23,609
Capital expenditures...................................... (13,446) (31,049) (27,221)
Net payment for purchase acquisition, net of cash
acquired............................................... (3,000) -- --
(Increase) decrease in other assets....................... (195) (94) 488
-------- -------- --------
Net cash used in investing activities................ (20,931) (65,403) (3,124)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid....................................... (7,500) -- --
Principal payments under long-term debt agreements........ (2,819) (2,817) (2,815)
-------- -------- --------
Cash used in financing activities.................... (10,319) (2,817) (2,815)
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENT......... 749 (4,666) 2,810
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 1,014 5,680 2,870
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 1,763 $ 1,014 $ 5,680
======== ======== ========

The accompanying notes are an integral part of these statements.
F-8

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS -- NYMEX Holdings, Inc. ("NYMEX Holdings") was
incorporated in 2000 as a stock corporation in Delaware, and is the successor to
the New York Mercantile Exchange which was established in 1872. The two
principal operating subsidiaries of NYMEX Holdings are the New York Mercantile
Exchange, Inc. ("NYMEX Division") and the Commodity Exchange, Inc. ("COMEX
Division"), which is organized as a wholly-owned subsidiary of NYMEX Division.
Where appropriate, each NYMEX Exchange operating division, NYMEX Division and
COMEX Division, will be discussed separately, and collectively will be referred
to as the "Exchange." When discussing NYMEX Holdings together with its
subsidiaries, reference is being made to the "Company."

The Company demutualized on November 17, 2000, at which time the book value
of the assets and liabilities of New York Mercantile Exchange carried over to
NYMEX Division.

The Company exists principally to provide facilities for buying and selling
energy and precious and base metals commodities for future delivery under rules
intended to protect the interests of market participants. The Company itself
does not own commodities, trade for its own account, or otherwise engage in
market activities. The Company provides the physical facilities necessary to
conduct an open outcry auction market, electronic trading systems, systems for
the matching and clearing of trades executed on the Exchange, and systems for
the clearing of certain bilateral trades executed in the over-the-counter
("OTC") market. These services facilitate price discovery, hedging, and
liquidity in the energy and metals markets. Transactions executed on the
Exchange mitigate the risk of counter-party default because the Company's
clearinghouse acts as the counter-party to every trade. Trading on the Exchange
is regulated by the Commodity Futures Trading Commission. To manage the risk of
financial nonperformance, the Exchange requires members to post margin.

BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of NYMEX Holdings and its subsidiaries. The accompanying financial
statements included herein have been prepared in accordance with generally
accepted accounting principles. The preparation of consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. Certain reclassifications have been made to the 2002 and 2001
consolidated financial statements to conform to the 2003 presentation.

PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries
NYMEX Division, COMEX Division, COMEX Clearing Association, Inc. ("CCA"), NYMEX
Technology Corp. (which became inactive in November 1996), and Tradingear
Acquisition LLC. Intercompany balances and transactions have been eliminated in
consolidation. COMEX Division and CCA were acquired by the Company in 1994.
While CCA is still in existence, its operations were consolidated into the NYMEX
Division in May 2003.

FAIR VALUE OF FINANCIAL INSTRUMENTS -- Statement of Financial Accounting
Standards No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of the fair value of financial instruments at the balance
sheet date. The carrying values of the Company's assets approximate their fair
values and, where applicable, are based on current market prices. The carrying
values of the Company's liabilities approximate their fair values except for the
fair value of the Company's notes payable, which are based upon their future
cash flows for principal and interest payments, discounted at prevailing
interest rates for securities of similar terms and maturities.

USE OF ESTIMATES -- The preparation of the accompanying consolidated
financial statements and related notes in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at
F-9

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the date of the financial statements, the reported amounts of revenues and
expenses during the reporting period, and the disclosure of contingent
liabilities. Actual results could differ from those estimates.

During fiscal year 2003, the Company changed its estimated useful lives for
technology equipment from a range of 4 to 7 years to a range of 3 to 7 years.
This change in estimate was based on management's belief that certain of this
equipment has shorter useful lives under the Company's new technology strategy
than originally estimated.

CASH AND CASH EQUIVALENTS -- Investments in money market funds and highly
liquid investments purchased with an original maturity of three months or less
are classified as cash equivalents. Cash equivalents are carried at cost, which
approximates fair value.

The Company maintains substantially all of its cash balances with major
financial institutions.

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL -- Securities purchased
under agreements to resell are carried at contract value, as specified in the
agreements. The market value of securities purchased under agreements to resell
is monitored by the Company and additional collateral is obtained as necessary
to protect against credit exposure. At December 31, 2003 and 2002, U.S.
government securities held in a segregated account by a U.S. money-center bank
collateralized the securities purchased under agreements to resell.

MARKETABLE SECURITIES -- The Company invests primarily in high-grade
tax-exempt municipal bonds and direct obligations of the U.S. government and its
agencies and money market mutual funds. Company has classified all of its
investments in debt and equities as trading. Management determines the
appropriate classification of debt and equity securities at the time of purchase
and re-evaluates such classification at each balance sheet date.

Trading securities are bought and held principally for the purpose of
selling them in the near future and are carried at fair value based on quoted
market prices and unrealized gains and losses are recognized in income
currently. Realized gains and losses from the sales of marketable securities are
determined on a specific identification basis.

The Company has provided financial guarantees and pledged collateral with
one of its investment managers relating to a membership seat financing program.
The investment manager retains a collateral interest in the underlying Company
investments equal to 118% of the outstanding loan balance. The Company has not
set up allowances for loan losses as the Company retains the exclusive right to
assert its lien on and security interest in the membership seat.

REVENUE RECOGNITION

Clearing and Transaction Revenue

The largest sources of the Company's operating revenues are clearing and
transaction fees. These fees are recognized as revenue in the same period that
trades are effectuated. Clearing and transaction fees receivable are monies due
from clearing member firms. Exposure to losses on receivables is principally
dependent on each member firm's financial condition. Seats owned by NYMEX
Division and COMEX Division members collateralize fees owed to the Company. At
the end of December 31, 2003 and 2002, no clearing and transaction fees
receivable balance was greater than the member's seat value. Management does not
believe that a concentration of credit risk exists from these receivables. The
Company retains the right to liquidate a member's seat in order to satisfy its
receivable.

The Company maintains, on a discretionary basis, a proprietary fee
reduction program that is subject to periodic approval by the board of
directors, pursuant to which certain clearing fees of NYMEX Division members are
substantially reduced. The Company has various other discretionary rebate and
cost reduction programs to reduce operating costs of certain market
participants.

F-10

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Market Data Revenues

Other Revenues

LONG-LIVED ASSETS -- The Company periodically evaluates the net realizable
value of long-lived assets, including property, plant and equipment and
amortizable intangible assets, relying on a number of factors including
operating results, business plans, economic projections and anticipated future
cash flows. When indicators of impairment are present, the carrying values of
the assets are evaluated in relation to the operating performance and estimated
future undiscounted cash flows of the underlying business. An impairment in the
carrying value of an asset is recognized whenever anticipated future cash flows
(undiscounted) from an asset are estimated to be less than its carrying value.
The amount of the impairment recognized is the difference between the carrying
value of the asset and its fair value. Fair values are based on assumptions
concerning the amount and timing of estimated future cash flows and assumed
discount rates, reflecting varying degrees of perceived risk.

The Company reviews long-lived assets for impairment, in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS No. 144). If facts and
circumstances indicate that the Company's long-lived assets might be impaired,
the estimated future undiscounted cash flows associated with the long-lived
asset would be compared to its carrying value to determine if a write-down to
fair value is necessary. If a write-down is required, the amount is determined
by comparing fair market values to carrying values in accordance with SFAS No.
144. During 2003, the Company shortened the estimated useful lives of certain
technology equipment. The Company believed, as of the September 30, 2003
evaluation date, that the undiscounted cash flows expected to be generated by
these assets exceeded their carrying amounts and, therefore, the assets were not
impaired. As of October 1, 2003, the Company began depreciating the carrying
values of these assets over the remaining periods of their new useful lives.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost, less
depreciation and amortization. Depreciation and amortization are provided
utilizing the straight-line method over the estimated useful lives of the assets
or lease terms, whichever is shorter.

The following table summarizes the years over which significant assets are
generally depreciated or amortized:

Building and improvements................................... 20 to 60 years
Information system equipment................................ 3 to 7 years
Furniture, fixtures, office machinery and other............. 3 to 10 years
Internally developed software costs......................... 3 to 5 years
Leasehold improvements...................................... 10 to 20 years

F-11

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Where different depreciation methods or lives are used for tax purposes,
deferred income taxes are recorded. The Company capitalizes purchases of
software and costs associated with internally developed software.

Expenditures for repairs and maintenance are charged to expense as
incurred. Expenditures for major renewals and betterments which significantly
extend the useful lives of existing property and equipment are capitalized and
depreciated.

MARKETING COSTS -- Marketing costs include costs incurred for producing and
communicating advertising and other marketing activities. These costs are
expensed when incurred.

GOODWILL -- Goodwill represents the excess of the purchase price over the
fair value of the net assets of the COMEX Division. As of December 31, 2003,
goodwill was $32.3 million. Prior to January 1, 2002, goodwill was being
amortized over a period of 15 years on a straight line basis. As of December 31,
2001, the accumulated amortization relating to goodwill was $16.0 million.
Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, and goodwill is no longer being amortized. Instead, the value
of goodwill is measured using the impairment model. Tests for impairment were
made during the fourth quarters of 2003 and 2002 and no impairment was noted.
The Company will perform an impairment test during the fourth quarter of each
year. Prior to 2002, goodwill was amortized on a straight-line basis over the
period of expected benefit of 15 years. The measurement of possible impairment
is based on the most recent sales of COMEX Division membership interests. COMEX
Division membership interests, or "seats", are purchased from existing COMEX
Division members at prevailing market prices. These prices are established
through a bid-and-ask system. There were no impairments recognized during any of
the periods presented.

The following table sets forth reported net income (loss) and earnings per
share, as adjusted to exclude goodwill amortization expense (in thousands,
except per share data):

2001
------

Net income as reported...................................... $ 680
Net income as adjusted...................................... $2,833
Basic and diluted earnings per share, as reported........... $ 833
Basic and diluted earnings per share, as adjusted........... $3,472

INCOME TAXES -- The Company accounts for income taxes in accordance SFAS
No. 109, Accounting for Income Taxes. SFAS No. 109 requires that deferred taxes
be established based upon the temporary differences between financial statement
and income tax bases of assets and liabilities using the enacted statutory
rates. A valuation allowance is recognized if it is anticipated that some or all
of a deferred tax asset may not be realized.

POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS -- The
Company provides certain postretirement benefits to its employees, which are
accounted for in accordance with SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions, which requires the Company to
accrue the estimated cost of retiree benefit payments other than pensions during
the employees' active service lives. Such benefits consist principally of health
care benefits. In addition, the Company offers various post-employment benefits
to employees after employment but before retirement. The benefits are accounted
for in accordance with SFAS No. 112, Employers' Accounting for Post-employment
Retirement Benefits, which requires the Company to accrue the estimated cost of
future post-employment benefits, which are funded on a pay-as-you-go basis.
Post-employment benefits include both short-term disability, income benefits and
long-term disability-related health benefits.

F-12

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EARNINGS PER SHARE -- The Company has only one type of earnings per share
calculation, basic earnings per share. In accordance with SFAS No. 128, Earnings
per Share, basic earnings per common share are based on the weighted-average
number of common shares outstanding in each year. There are no common stock
equivalents and, thus, no dilution of earnings per share. Earnings per share
were $10,882, $15,072 and $833 in 2003, 2002 and 2001, respectively.

SEGMENT REPORTING -- The Company considers operating results for two
business segments: Open Outcry and Electronic Trading and Clearing. The Open
Outcry is the trading and clearing of NYMEX Division and COMEX Division futures
and options contracts on the trading floor of the Exchange. Electronic Trading
and Clearing consists of NYMEX ACCESS(R), NYMEX ClearPort(SM) Trading and NYMEX
ClearPort(SM) Clearing. The Company reports income on a segment basis, but does
not allocate assets or goodwill.

RECENT ACCOUNTING PRONOUNCEMENTS AND CHANGES

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses financial accounting and
reporting for costs associated with exit or disposal activities, and nullifies
Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring), which previously governed
the accounting treatment for restructuring activities. The adoption of SFAS No.
146 did not have a material impact on the Company's consolidated results of
operations, financial position or cash flows. SFAS No. 146 applies to costs
associated with an exit activity that does not involve an entity newly acquired
in a business combination or with a disposal activity covered by SFAS No. 144.
Those costs include, but are not limited to, the following: (1) termination
benefits under the terms of a benefit arrangement that, in substance, is not an
ongoing benefit arrangement or an individual deferred-compensation contract, (2)
costs to terminate a contract that is not a capital lease, and (3) costs to
consolidate facilities to relocate employees. SFAS No. 146 does not apply to
costs associated with the retirement of long-lived assets covered by SFAS No.
143. The adoption of SFAS No. 146 did not have a material impact on the
Company's consolidated results of operations, financial position or cash flows.

F-13

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. COLLATERIZATION

In connection with reverse repurchase agreements, the Company receives
collateral that is held in custody by the Company's banks. At December 31, 2003,
2002 and 2001, the Company accepted collateral in the form of U.S. treasury
bills that it is permitted by contract or industry practice to sell or
re-pledge, although it is not the Company's policy to sell or re-pledge the
collateral. The fair value of such collateral at December 31, 2003 and 2002 were
$45.1 million and $40.8 million, respectively.

F-14

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. PROPERTY AND EQUIPMENT, NET

Property, plant and equipment consisted of the following;

DECEMBER 31,
-------------------
2003 2002
-------- --------
(IN THOUSANDS)

Buildings and improvements.................................. $180,938 $179,942
Information systems equipment............................... 49,287 58,222
Office furniture, fixtures, machinery and equipment......... 38,194 33,631
Internally developed software............................... 21,079 19,583
Leasehold improvements...................................... 13,040 10,355
-------- --------
302,538 301,733
Less accumulated depreciation and amortization.............. (93,751) (77,855)
-------- --------
$208,787 $223,878
======== ========

Depreciation expense for the years ended December 31, 2003, 2002 and 2001
was approximately $24.7 million, $20.9 million and $16.0 million, respectively.
Buildings and improvements are recorded net of amortization of the deferred
credit related to the grant for the building of $2.1 million for each year.
Amortization of leasehold improvements is included with depreciation expense in
the accompanying financial statements.

During fiscal years 2003, 2002 and 2001, the Company determined that
impairment losses had taken place for certain computer equipment, capitalized
software development costs and other equipment that were deemed to be obsolete.
The losses on disposition of these assets are included in the Consolidated
Statements of Income. For the years ended December 31, 2003, 2002 and 2001,
impairment and disposition losses on capitalized software, computer equipment
and other fixed assets were $2.3 million, $12.6 million and $5.1 million,
respectively.

NOTE 4. NOTES PAYABLE

The Company issued long-term debt totaling $100 million during 1996 and
1997 to provide completion financing for the Company's trading facility and
headquarters. This issue contained three series, each with different maturities,
interest rates, and repayment schedules. Series A notes require annual principal
repayments from 2001 to 2010, and a final payment of principal in 2011. Series B
notes require annual principal repayments from 2011 to 2020, and a final payment
of principal in 2021. Series C notes require annual principal repayments from
2022 to 2025, and a final payment of principal in 2026. The notes represent

F-15

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

senior unsecured obligations of the Company and are not secured by the facility,
the Company's interest therein, or any other collateral.

(IN THOUSANDS)
DECEMBER 31,
-----------------
2003 2002
------- -------

Private Placement Notes
7.48% Senior Notes, Series A, due 2011.................... $22,549 $25,366
7.75% Senior Notes, Series B, due 2021.................... 54,000 54,000
7.84% Senior Notes, Series C, due 2026.................... 15,000 15,000
------- -------
91,549 94,366
Less current maturities................................... (2,817) (2,815)
------- -------
Total long-term debt, excluding current maturities........ $88,732 $91,551
======= =======

Notes payable that become due during the next five years are as follows (in
thousands):

NOTE 5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The following supplemental disclosures of cash flow information for the
years ended December 31, 2003, 2002, and 2001, respectively, are as follows (in
thousands):

2003 2002 2001
------ ------ ------

Dividends declared......................................... $5,000 $5,000 $ --
====== ====== ======
Cash paid for:
Interest................................................. $7,258 $7,477 $7,681
====== ====== ======
Dividends................................................ $7,500 $ -- $ --
====== ====== ======
Income taxes............................................. $5,595 $1,232 $ --
====== ====== ======
Increase in prepaid taxes due to NYMEX MRRP tax
benefit............................................... $ -- $ -- $5,728
====== ====== ======
Increase in deferred tax asset due to COMEX MRRP tax
benefit............................................... $ -- $ -- $3,169
====== ====== ======
Transfer of short-term portion of security deposit to other
current assets........................................... $ -- $ -- $2,699
====== ====== ======

NOTE 6. MEMBERS' RETIREMENT PLAN AND BENEFITS

During 2000, the Company's board of directors voted to terminate the NYMEX
Division Members' Retention and Retirement Plan. The Company had maintained a
retention program which covered NYMEX Division members, based on long-term and
continuous membership. This plan was terminated in October 2000 and fully
liquidated in January 2001.

The Company continues to maintain a similar program for members of the
COMEX Division. The annual benefit payments are $12,500 ($2,000 for options
members) for ten years for vested participants and no new participants were
permitted after the date of the merger. No payments were made prior to January
1,

F-16

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2002. In addition, under the terms of the COMEX merger agreement, the COMEX
Division program is funded at a minimum of $400,000 annually. In no event will
the Company's contribution be greater than $800,000 a year. Such amounts may be
reduced if actuarial assumptions indicate that full funding can be achieved
without making the entire funding contributions indicated above. The Company
funded the COMEX program by $800,000 in 2003. Corporate contributions and
related investment earnings are charged against current operations.

All benefits to be paid under the COMEX Division program shall be based
upon reasonable actuarial assumptions which, in turn, are based upon the amounts
that are available and are expected to be available to pay benefits, except that
the benefits paid to any individual will not exceed the amounts stated above.
Quarterly distributions from the program began in the second quarter of 2002.

Subject to the foregoing, the board of directors of the Company reserves
the right to amend or terminate the program upon an affirmative vote of 60% of
the eligible COMEX Division plan participants.

NOTE 7. DEFINED CONTRIBUTION PLAN

The Company sponsors a defined contribution plan (the "Plan") for all
eligible domestic employees. The Plan qualifies as a deferred salary arrangement
under Section 401(k) of the Internal Revenue Code. Under the Plan, participating
employees may defer up to 25% of their pre-tax earnings, subject to the annual
Internal Revenue Code contribution limit. The Company matches contributions up
to a maximum of 3% of salary. In addition, the Company makes annual
contributions ranging from 2% to 7% based upon tenure for each eligible Plan
member. Employees vest immediately in their contribution and vest in the
Company's contribution at a rate of 40% after two full years of service, and
then 20% per year until fully vested at 100% after five years of service. The
Company's total contributions to the Plan were $1.8 million, $1.7 million and
$1.7 million for the years ended December 31, 2003, 2002 and 2001, respectively.

NOTE 8. DEFERRED COMPENSATION

The Company has a nonqualified deferred compensation plan (the "Deferred
Plan") for key employees to permit them to defer receipt of current
compensation. The Company may provide a matching and a regular year-end
contribution to the Deferred Plan. Matching and year-end contribution
percentages follow the same guidelines as the Company's defined contribution
plan. The Deferred Plan is not intended to be a qualified plan under the
provisions of the Internal Revenue Code. It is intended to be unfunded and,
therefore, all compensation deferred under the Deferred Plan is held by the
Company and commingled with its general assets. The participating employees are
general creditors of the Company with respect to these benefits. The Company has
the right to amend, modify, or terminate the Deferred Plan at any time. At
December 31, 2003 and 2002, deferred compensation amounted to $2.0 million and
$1.3 million, respectively and is included in the consolidated balance sheet.

NOTE 9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company's postretirement benefit costs are developed from actuarial
valuations. Inherent in these valuations are key assumptions, including the
discount rate and expected long-term rate of return on plan assets. Material
changes in our postretirement benefit costs may occur in the future due to
changes in these assumptions, changes in the number of plan participants,
changes in the level of benefits provided, and changes in asset levels.

The Company provides certain health care and life insurance benefit plans
for qualifying retired employees. Substantially all of the Company's employees
may become eligible for these benefits if they reach specified age and years of
service criteria while working for the Company. The benefits are provided
through

F-17

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

certain insurance companies. The Company expects to fund its share of such
benefit costs principally on a pay-as-you-go basis.

In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the "Act") became law in the United States. The Act
introduces a prescription drug benefit under Medicare as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide a benefit
that is at least actuarially equivalent to the Medicare benefit. In accordance
with FASB Staff Position FAS 106-1, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug Improvement and Modernization Act of
2003, the Company has elected to defer recognition of the effects of the Act in
any measures of the benefit obligation or cost. Specific authoritative guidance
on the accounting for the federal subsidy is pending and that guidance, when
issued, could require the Company to change previously reported information.
Currently, the Company does not believe it will need to amend its plan to
benefit from the Act. The measurement date used to determine pension and other
postretirement benefit measures for the pension plan and the postretirement
benefit plan is December 31.

Accrued postretirement benefit costs are included in other non-current
liabilities in the consolidated balance sheets. The accrued postretirement
obligations recorded in the balance sheet at December 31, 2003 and 2002 exceed
the amount of the accumulated obligations, as indicated below.

The following table presents the funded status of such plans, reconciled
with amounts recognized in the Company's consolidated financial statements at
December 31 (in thousands):

2003 2002
---- ----

Change in accumulated postretirement benefit obligation:
Accumulated postretirement benefit obligation, beginning
of year................................................ $ 6,109 $5,183
Service cost.............................................. 220 428
Interest cost............................................. 247 355
Impact of special termination benefits.................... -- --
Actuarial (gain) loss..................................... (150) 406
Adjustment for prior years' overstatement................. (1,784) --
Benefits paid............................................. (276) (263)
------- ------
Accumulated postretirement benefit obligation, end of
year................................................... $ 4,366 $6,109
======= ======
Funded status:
Accumulated postretirement benefit obligation, end of
year................................................... $ 4,366 $6,109
Unrecognized transition obligation........................ -- (993)
Unrecognized prior service cost........................... 575 1,075
Unrecognized net gain..................................... 537 278
------- ------
Accrued postretirement benefit cost, end of year.......... $ 5,478 $6,469
======= ======

F-18

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2003 2002 2001
---- ---- ----

Net periodic postretirement benefit cost consists of the
following components for the years ended December 31:
Service cost.............................................. $ 220 $ 428 $ 445
Interest cost............................................. 246 355 352
Amortization of:
Transition obligation.................................. -- 83 97
Prior service cost..................................... (57) (101) (119)
Net (gain)............................................. (23) (18) (40)
------- ----- -----
Net periodic postretirement benefit cost.................. 386 747 735
Adjustment for prior years' overstatement................. (1,102) -- 148
Curtailment (gain)........................................ -- -- (732)
------- ----- -----
Total net periodic postretirement benefit cost............ $ (716) $ 747 $ 151
======= ===== =====

2001
-----

Impact of curtailment.......................................
Change in accumulated postretirement benefit obligation... $(715)
Recognized transition obligation.......................... 182
Recognized prior service cost............................. (199)
-----
Curtailment (gain).......................................... $(732)
=====

The weighted-average discount rates used in determining the accumulated
postretirement benefit obligation were 6.0%, 6.5% and 7.0% at December 31, 2003,
2002, 2001, respectively.

The weighted-average annual assumed rates of increase in the per capita
cost to cover benefits (i.e., health care cost trend rate) is 8.5%, 9.0%, and
9.5% for 2003, 2002, and 2001, respectively, and is assumed to decrease
gradually to 5.5% by 2009 and remain level thereafter.

The following shows the impact, in thousands of dollars, of a 1% change in
the trend rate:

2003
-------------------
1% 1%
INCREASE DECREASE
-------- --------

Effect on total of service and interest cost................ $ 8 $ (8)
Effect on accumulated postretirement benefit obligation..... $54 $(58)

During 2003, the Company reduced its accrued postretirement benefit cost by
$1.1 million, which was attributable to revisions to certain assumptions made in
earlier years. Accordingly, the Company reduced salaries and employee benefits
expenses in the Consolidated Statement of Income by a similar amount in 2003, of
which $0.3 million, $0.1 million and $0.8 million were attributable to 2002,
2001, and 2000 and prior years respectively. The Company believes that the
effect of the adjustment was not material to its consolidated financial position
or results of operations for any of the years impacted and accordingly, the full
amount was recorded in 2003.

NOTE 10. DEFERRED CREDITS

F-19

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and trading facility. The grant is being recognized in income on the same basis
as, and is a reduction to, the depreciation of the facility.

NOTE 11. POSTEMPLOYMENT BENEFITS

The Company offers various post-employment benefits to employees after
employment but before retirement. These benefits are paid in accordance with the
Company's established postemployment benefit practices and policies.
Postemployment benefits include both short term disability income benefits and
long term disability related health benefits. The Company accrues for these
future postemployment benefits, which are funded on a pay-as-you-go basis. The
Company's postemployment benefits liability at December 31, 2003 and December
31, 2002 were $980,000.

NOTE 12. INCOME TAXES

The provision (benefit) for income taxes in the Consolidated Statements of
Income for the years ended December 31, 2003, 2002 and 2001, respectively,
consisted of the following (in thousands):

2003 2002 2001
------- ------- -------

Current:
Federal............................................... $ 8,426 $11,666 $(2,876)
State and local....................................... 3,795 4,770 112
------- ------- -------
Total................................................. 12,221 16,436 (2,764)
------- ------- -------
Deferred:
Federal............................................... (4,095) (3,163) 3,160
State and local....................................... (1,065) (511) 386
------- ------- -------
Total................................................. (5,160) (3,674) 3,546
------- ------- -------
Total provision.................................... $ 7,061 $12,762 $ 782
======= ======= =======

Reconciliation of the statutory U.S. federal income tax rate to the
effective tax rate on income before tax is as follows:

2003 2002 2001
---- ---- ----

Statutory U.S. federal tax rate............................. 34.0% 34.0% 34.0%
State and local taxes, net of federal benefit............... 11.4% 10.9% 16.9%
Change in estimate.......................................... 3.1% 6.0% 34.9%
Tax-exempt income........................................... (6.0%) (3.0%) (54.5%)
Deferred credit amortization -- grant for building
construction.............................................. -- (2.9%) (49.9%)
Valuation allowance......................................... 0.6% 2.3% 13.6%
Amortization of goodwill.................................... -- -- 50.1%
Other, net.................................................. 1.2% 3.6% 8.4%
---- ---- -----
Effective tax rate.......................................... 44.3% 50.9% 53.5%
==== ==== =====

F-20

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, the components of net deferred tax assets (liabilities)
were as follows (in thousands):

2003 2002
------- -------

Current
Assets:
Accrued expenses....................................... $ 4,002 $ 3,179
Allowance for member credits adjustments............... 110 175
Other.................................................. 159 260
------- -------
Total....................................................... 4,271 3,614
------- -------
Liabilities:
Unrealized gains on marketable securities.............. 137 366
Other.................................................. -- 15
------- -------
Total....................................................... 137 381
------- -------
Total current net deferred tax assets....................... 4,134 3,233
------- -------
Noncurrent
Assets:
Postretirement benefits................................ 3,380 3,374
Deferred compensation.................................. 891 585
COMEX retention and retirement program................. 3,215 3,962
COMEX MRRP contribution and earnings................... 2,096 556
Demutualization costs.................................. 806 1,214
Federal net operating loss carryforwards............... 361 486
Charitable contributions carryforward.................. 3,422 3,437
AMT credit carryforwards............................... 796 405
State and city operating losses........................ -- 189
Other.................................................. 892 557
------- -------
Total....................................................... 15,859 14,765
Less valuation allowance............................... (1,637) (1,692)
------- -------
Total noncurrent deferred tax assets........................ 14,222 13,073
------- -------
Liabilities:
Capitalization of software............................. 4,120 5,194
Depreciation and amortization.......................... 16,063 17,501
------- -------
Total noncurrent deferred tax liabilities................... 20,183 22,695
------- -------
Total net noncurrent deferred tax liabilities............... $(5,961) $(9,622)
======= =======

Management has determined that the realization of the recognized gross
deferred tax asset of $18.5 million at December 31, 2003 is more likely than
not, based on taxable temporary differences and anticipated future taxable
income. However, if estimates of future taxable income are reduced, the amount
of the deferred tax asset considered realizable could also be reduced.

The Company maintained valuation allowances of $1.6 million and $1.7
million in 2003 and 2002, respectively, in accordance with the provisions of
SFAS No. 109. The allowances were established due to the uncertainty of
realizing certain tax carryforwards.

NOTE 13. REDUCTION-IN-WORKFORCE

In 2001, the Company implemented a reduction-in-workforce program which
eliminated 20% of the Company's staff. These employees were notified and
terminated by the end of the year. This program was adopted in an effort to
establish a more cost-efficient business structure in response to competition.
These staff

F-21

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reductions encompassed various professional and clerical positions throughout
the Company. Restructuring and related costs recorded in fiscal year 2001 were
$4.7 million. These costs were fully paid by the end of fiscal year 2002. There
were no additional restructuring charges recorded in fiscal year 2003.

NOTE 14. CLEARING DEPOSITS AND GUARANTY FUNDS

The Company is entitled to earn interest on cash balances posted as
clearing deposits and guaranty funds. Such balances are included in the
Company's Consolidated Balance Sheets, and are generally invested overnight in
securities purchased under agreements to resell. The following table sets forth
clearing deposits and guaranty fund balances held by the Company on behalf of
clearing members at December 31, 2003 and 2002 (in thousands):

TOTAL
RESALE RESALE MONEY U.S. LETTERS OF TOTAL
CASH AGREEMENTS AND CASH MARKET TREASURIES CREDIT FUNDS
---- ---------- -------- ---------- ---------- ---------- ----------

2003
----------------------
Clearing deposits... $ 67 $92,450 $92,517 $2,099,620 $5,108,929 $408,632 $7,709,698
Guaranty funds...... 81 4,640 4,721 -- 149,911 -- 154,632
---- ------- ------- ---------- ---------- -------- ----------
Total Company....... $148 $97,090 $97,238 $2,099,620 $5,258,840 $408,632 $7,864,330
==== ======= ======= ========== ========== ======== ==========

2002
----------------------
NYMEX Division
Clearing deposits... $340 $65,935 $66,275 $1,434,975 $2,276,351 $247,580 $4,025,181
Guaranty funds...... -- 105 105 -- 79,721 -- 79,826
---- ------- ------- ---------- ---------- -------- ----------
Total NYMEX......... $340 $66,040 $66,380 $1,434,975 $2,356,072 $247,580 $4,105,007
==== ======= ======= ========== ========== ======== ==========
COMEX Division
Clearing deposits... $ -- $ 8,030 $ 8,030 $ -- $ 937,310 $ 61,150 $1,006,490
Guaranty funds...... -- 917 917 -- 74,437 -- 75,354
---- ------- ------- ---------- ---------- -------- ----------
Total COMEX......... $ -- $ 8,947 $ 8,947 $ -- $1,011,747 $ 61,150 $1,081,844
==== ======= ======= ========== ========== ======== ==========
Total Company....... $340 $74,987 $75,327 $1,434,975 $3,367,819 $308,730 $5,186,851
==== ======= ======= ========== ========== ======== ==========

F-22

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15. ACQUISITION

On March 31, 2003, the Company acquired the assets and assumed certain
liabilities of TradinGear.com ("TradinGear"), a Delaware limited liability
company in cash. The acquisition was accounted for under the purchase method of
accounting and accordingly, the acquired assets and assumed liabilities have
been recorded at their estimated fair values. The purchase price was $3,000,000
in cash. The Company considered, among other things, the value of the
above-mentioned exclusive license as well as the potential additional revenue
generated from TradinGear's customer contracts in determining the consideration
furnished for TradinGear's assets.

NOTE 16. SEGMENT REPORTING

The Company considers operating results for two business segments: Open
Outcry and Electronic Trading and Clearing. The Open Outcry is the trading and
clearing of NYMEX Division and COMEX Division futures and options contracts on
the trading floor of the Exchange. Electronic Trading and Clearing consists of
NYMEX ACCESS(R), NYMEX ClearPort(SM) Trading and NYMEX ClearPort(SM) Clearing.

Financial information relating to these business segments, in thousands, is
set forth below:

ELECTRONIC
TRADING AND
OPEN OUTCRY CLEARING TOTAL
----------- ----------- --------

YEAR ENDED DECEMBER 31, 2003:
Operating revenues....................................... $165,973 $ 18,195 $184,168
Operating expenses....................................... 142,654 22,837 165,491
-------- -------- --------
Operating income......................................... 23,319 (4,642) 18,677
Investment income, net................................... 4,501 -- 4,501
Interest expense......................................... 7,237 -- 7,237
Income tax provision..................................... 9,117 (2,056) 7,061
-------- -------- --------
Net income............................................... $ 11,466 $ (2,586) $ 8,880
======== ======== ========

ELECTRONIC
TRADING AND
OPEN OUTCRY CLEARING TOTAL
----------- ----------- --------

YEAR ENDED DECEMBER 31, 2002:
Operating revenues....................................... $172,237 $ 16,967 $189,204
Operating expenses....................................... 139,931 22,471 162,402
-------- -------- --------
Operating income (loss).................................. 32,306 (5,504) 26,802
Investment income, net................................... 5,714 -- 5,714
Interest expense......................................... 7,455 -- 7,455
Income tax provision (benefit)........................... 15,563 (2,801) 12,762
-------- -------- --------
Net income (loss)........................................ $ 15,002 $ (2,703) $ 12,299
======== ======== ========

F-23

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ELECTRONIC
TRADING AND
OPEN OUTCRY CLEARING TOTAL
----------- ----------- --------

YEAR ENDED DECEMBER 31, 2001:
Operating revenues....................................... $135,036 $ 9,245 $144,281
Operating expenses....................................... 112,402 27,398 139,800
-------- -------- --------
Operating income (loss).................................. 22,634 (18,153) 4,481
Investment income, net................................... 4,643 -- 4,643
Interest expense......................................... 7,662 -- 7,662
Income tax provision (benefit)........................... 10,494 (9,712) 782
-------- -------- --------
Net income (loss)........................................ $ 9,121 $ (8,441) $ 680
======== ======== ========

Company does not account for, and does not report to management, its assets
(other than goodwill and other intangible assets for SFAS No. 142 reporting
purposes) or capital expenditures by business unit.

NOTE 17. COMMITMENTS AND CONTINGENCIES

The Company has been named as a defendant in the following legal actions:

eSpeed, Inc. and Electronic Trading Systems Corporation. v. New York Mercantile
Exchange. This action was originally filed in the United States District Court
for the Northern District of Texas (Dallas Division) and was transferred to
United States District Court for the Southern District of New York. NYMEX
Exchange was served with a summons and complaint on or about May 10, 1999. This
was a patent infringement case, relating to the Company's electronic trading
system. This matter was settled on December 18, 2003.

New York Mercantile Exchange v. GlobalView Software, Inc. On April 27, 2001,
NYMEX Exchange filed a breach of contract suit in New York State Supreme Court
(New York County) against Global View Software, Inc. ("GlobalView") NYMEX
Exchange sought to recover direct and consequential damages resulting from
GlobalView's breach of its contract with NYMEX Exchange regarding the front-end
development for enymex(SM). On or about June 18, 2001, GlobalView served its
answer and counterclaims in which it sought to recover amounts in excess of
$26,000,000 for alleged fees due and owing under the contract, as well as
consequential damages and other causes of action. This case was settled on May
6, 2003.

F-24

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

New York Mercantile Exchange v. Intercontinental Exchange, Inc. On November 20,
2002, NYMEX Exchange commenced an action in United States District Court for the
Southern District of New York against Intercontinental Exchange, Inc. ("ICE").
The amended complaint alleges claims for (a) copyright infringement by ICE
arising out of ICE's uses of certain NYMEX Exchange settlement prices; (b)
service mark infringement by reason of use by ICE of the service marks NYMEX and
NEW YORK MERCANTILE EXCHANGE, (c) violation of trademark anti-dilution statutes,
and (d) interference with contractual relationships. On January 6, 2003, ICE
served an Answer and Counterclaims, in which ICE alleges five counterclaims
against NYMEX Exchange as follows: (1) a claim for purported violation of
Section 2 of the Sherman Act, 15 U.S.C. sec. 2, for NYMEX Exchange's allegedly
trying to maintain a monopoly in the execution of the North America energy
futures and expand the alleged monopoly into the execution and clearing of North
American OTC energy contracts by attempting to deny ICE access to NYMEX Exchange
Settlement Prices; (2) a claim for purported violation of Section 1 of the
Sherman Act by conspiring with certain of its members to restrain trade by
attempting to deny ICE access to NYMEX Exchange Settlement Prices; (3) a claim
for alleged violation of Section 2 of the Sherman Act by NYMEX Exchange
purportedly denying ICE access to NYMEX Exchange's Settlement Prices which are
allegedly an "essential facility"; (4) a claim for purported violation of
Section 1 of the Sherman Act and Section 3 of the Clayton Act by NYMEX Exchange
allegedly tying execution services for North American energy futures and options
to clearing services; and (5) a claim for purported violation of the Lanham Act
through false advertising with respect to certain services offered by NYMEX
Exchange and services offered by ICE. The counterclaims request damages and
trebled damages in amounts not specified yet by ICE in addition to injunctive
and declaratory relief. NYMEX Exchange's response to the counterclaims was
served on February 26, 2003. On August 11, 2003, the Court issued an opinion
dismissing certain counterclaims and one affirmative defense, with leave to
replead. On or about August 28, 2003, the NYMEX Exchange was served with ICE's
First Amended Counterclaims in which ICE makes four counterclaims against NYMEX
Exchange principally alleging violations of U.S. antitrust laws, including
claims regarding monopoly leveraging. This case is ongoing.

The Company occupies premises under leases, including a land lease, with
various lessors which expire in 2003 through 2069. For the years ended December
31, 2003, 2002 and 2001, rental expense for facilities and land leases amounted
to $4.0 million, $3.8 million and $2.0 million, respectively. At December 31,
2003, the Company was obligated for future minimum rental payments for office
and equipment leases required under the non-cancelable terms of various leases
as follows (in thousands):

FACILITIES EQUIPMENT
YEAR LEASES LEASES TOTAL
---- ---------- --------- -------

2004................................................... $ 3,247 $2,265 $ 5,512
2005................................................... 3,331 460 3,791
2006................................................... 3,299 296 3,595
2007................................................... 3,246 -- 3,246
2008................................................... 3,266 -- 3,266
2009 and thereafter.................................... 14,510 -- 14,510

The Company leases space to tenants in its headquarters. Rents collected
from these leases were $7.3 million, $4.0 million and $4.3 million during 2003,
2002 and 2001, respectively and is recorded as other revenue.

The lease commitments on the Company's facilities include scheduled base
rent increases over the terms of the leases. The base rent payments are being
charged to expense on the straight-line method over the terms of the leases. The
Company has recorded a deferred credit to reflect the excess of rent expense
over cash payments since inception of the leases.

F-25

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 1994, the Company entered into a Letter of Intent with Battery Park City
Authority ("BPCA"), the New York City Economic Development Corporation ("EDC"),
and the Empire State Development Corporation ("ESDC," formerly called the New
York State Urban Development Corporation) to construct a new trading facility
and office building on a site in Battery Park City. By agreement dated May 18,
1995, EDC and ESDC agreed to provide funding of $128.7 million to construct the
facility. The Company is liable for liquidated damages on a declining scale,
with an initial maximum of up to $75 million, if it violates terms of the
occupancy agreement at any time prior to the 15 years from the date of
occupancy, July 7, 1997.

In May 1995, the Company signed a ground lease (expiring June 2069) with
BPCA for the site where it constructed its headquarters and trading facility.
The lease establishes payments in lieu of taxes ("PILOTs") due to New York City,
as follows: for the trading portion of the facility, PILOTs are entirely abated
for the first 20 years after occupancy; for the office portion of the facility,
PILOTs are entirely abated for one year after occupancy, at a percentage of
assessment (ranging from 25% to 92.5%) for the next 10 years and, thereafter, at
an amount equal to assessment. Sub-let space is not eligible for abatements.

In 2002, the Company entered into an agreement and received a $5 million
grant from Empire State Development Corp. This agreement requires the company to
maintain certain annual employment levels, and the grant is subject to recapture
amounts, on a declining scale, over time.

The Company and the Board of Trade of the City of New York, Inc. ("NYBOT")
entered into a lease that became effective on November 20, 2002. This lease
provides that NYBOT will lease 13,170 square feet on the COMEX Division Trading
Floor and 45,006 square feet of office space for a ten-year term. The rent
commencement date for the trading floor space is the earlier of occupancy or
July 1, 2003. The rent commencement date for the office space is the earlier of
occupancy or May 20, 2003.

NOTE 18. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The inherent nature of the Company's business frequently gives rise to
related party transactions. The majority of the Company's shareholders,
including several members of the board of directors, frequently do business with
the Exchange. The Board establishes fees and usage charges and also determines
the level of payments under any proprietary fee reduction or other cost
reduction programs.

The following are descriptions of material transactions involving the
Company and its directors:

Pioneer Futures, Inc. ("Pioneer"), of which the Chairman of the Board of
the Company is the sole shareholder, is one of the largest clearing members with
whom the Company does business. For the year ended December 31, 2003, a total of
$9.2 million in revenue was derived from Pioneer from clearing and transaction
fees and $0.7 million was derived from rental income. These amounts represent 5%
of the Company's total consolidated revenue.

Sterling Commodities Corp. ("Sterling"), of which a director of the
Company, is the President, currently leases from NYMEX Exchange space at the One
North End Avenue facility. The lease expires on November 30, 2007. The aggregate
amount of rent collected from Sterling during 2003 was $242,000. The director's
father is Chief Executive Officer and 100% owner of Sterling. The clearing
revenues earned from Sterling in 2003 were approximately $1.6 million
representing approximately 1% of the Company's consolidated revenues.

ABN-AMRO, Inc. ("ABN-AMRO"), of which the Treasurer of the Company is an
executive, currently leases from NYMEX Exchange space at the One North End
Avenue facility. ABN-AMRO currently has two
F-26

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

leases, one of which had a three-month rent free period. The aggregate amount of
rent collected from ABN-AMRO during 2003 was $72,390.

The Company had invested assets segregated for the benefit of the COMEX
Members' Recognition and Retention Plan of $11.7 million at December 31, 2003,
in a portfolio of fixed income securities managed by a major securities firm of
which a director of the Company is a senior investment officer.

The Company has provided financial guarantees and pledged collateral
relating to a membership seat financing program with one of its banks. Pursuant
to this program, the member remains primarily liable for the loan that is used
to purchase an interest in the Company. The Company's guarantee is limited by a
specified dollar amount, and the Company has the right to liquidate the interest
if the member defaults on the loan. As of December 31, 2003, one director had a
loan balance relating to this program in excess of $60,000. The outstanding
balance on this loan at December 31, 2003 was $76,000. At December 31, 2003, the
Company had pledged collateral under this program in the form of marketable
securities in the amount of $10.4 million.

The following table below reflects the member loan balances outstanding and
collateral held by the Company on behalf of Exchange members at December 31, (in
thousands):

2003 2002
------- ------

Loan balance outstanding.................................... $ 8,845 $5,028
Collateral on deposit....................................... $10,437 $5,933

NOTE 19. DISASTER RECOVERY

On September 11, 2001, terrorists attacked the World Trade Center, causing
the closure of the Company's trading facility for four business days and
limiting trading hours through the end of the year and into 2002. The Company
received an insurance recovery of $17.25 million for losses resulting from the
terrorist attacks, of which $8.6 million were reimbursements for additional
operating costs, and the remaining $8.65 million was for recovery of business
interruption insurance as a result of limited trading hours and was recorded in
other income in the consolidated statement of income.

NOTE 20. PARENT COMPANY ONLY INFORMATION

NYMEX Holdings, Inc., the registrant, has two assets, its investments in
its wholly-owned subsidiaries, New York Mercantile Exchange, Inc., or NYMEX, and
Tradingear Acquisition LLC totaling $101.5 million and $105.4 million at
December 31, 2003 and 2002, respectively. The registrant has only one liability,
dividends payable to shareholders in the amount of $2.5 million. Net income from
these investments on the equity basis of accounting amounted to $8.9 million and
$12.3 million for the years ended December 31, 2003 and 2002, respectively.
Other than the dividends payable to shareholders, the registrant has no
liabilities, material contingencies or guarantees. During 2003, the registrant
received no cash dividends from the New York Mercantile Exchange.

F-27

NYMEX HOLDINGS, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 21. QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share
data)

2003
-------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------

Trading volumes
NYMEX Division......................................... 32,519 25,470 26,979 29,757
COMEX Division......................................... 5,893 5,298 6,751 6,521
------- ------- ------- -------
Total................................................ 38,412 30,768 33,730 36,278
======= ======= ======= =======
Summarized financial data
Operating revenues..................................... $49,625 $40,593 $45,848 $48,102
Operating expenses..................................... 37,461 40,760 42,170 45,100
------- ------- ------- -------
Operating income (loss)................................ 12,164 (167) 3,678 3,002
Investment income, net................................. 686 2,064 643 1,108
Interest expense....................................... 1,822 1,823 1,823 1,769
Provision (benefit).................................... 5,273 (103) 960 931
------- ------- ------- -------
Net income (loss)...................................... $ 5,755 $ 177 $ 1,538 $ 1,410
======= ======= ======= =======
Net income (loss) per common stockholder............... $ 7,053 $ 217 $ 1,885 $ 1,728
======= ======= ======= =======
Common stock prices
High................................................... $ 1,325 $ 1,356 $ 1,625 $ 1,625
Low.................................................... $ 1,150 $ 1,170 $ 1,500 $ 1,500

2002
-------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------

Trading volumes
NYMEX Division......................................... 27,797 30,234 28,875 29,232
COMEX Division......................................... 4,063 4,773 4,318 4,398
------- ------- ------- -------
Total................................................ 31,860 35,007 33,193 33,630
======= ======= ======= =======
Summarized financial data
Operating revenues..................................... 42,689 47,238 45,338 53,939
Operating expenses..................................... 33,714 36,742 36,250 55,696
------- ------- ------- -------
Operating income (loss)................................ 8,975 10,496 9,088 (1,757)
Investment income, net................................. 809 2,037 2,043 825
Interest expense....................................... 1,874 1,875 1,875 1,831
Provision (benefit).................................... 3,955 5,032 4,427 (652)
------- ------- ------- -------
Net income (loss)...................................... $ 3,955 $ 5,626 $ 4,829 $(2,111)
======= ======= ======= =======
Net income (loss) per common stockholder............... $ 4,847 $ 6,895 $ 5,918 $(2,588)
======= ======= ======= =======
Common stock prices
High................................................... $ 900 $ 1,050 $ 1,100 $ 1,300
Low.................................................... $ 825 $ 920 $ 1,000 $ 1,000

F-28