##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

FORM 10-Q

|  |  |                                                                                                 
|- |  | ------------------------------------------------------------------------------------------------
|þ |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
| 
|  |  | For the Quarterly Period Ended March 31,
    2004                                               
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  | For the Transition Period
    from           to                                                 



---

NYMEX Holdings, Inc.

|                         |  |                          |  |                                            
|------------------------ |  | ------------------------ |  | -------------------------------------------
|Delaware                 |  | 333-30332                |  | 13-4098266                                 
|(State of Incorporation) |  | (Commission File Number) |  | (I.R.S. Employer Identification
    Number)

One North End Avenue

World Financial Center


New York, New York
10282-1101


(212) 299-2000




---

Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:

Common Stock




---

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 þ          No o

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

The number of shares of NYMEX Holdings, Inc.
capital stock outstanding as of May 5, 2004 was 816. The
aggregate market value of NYMEX Holdings, Inc. capital stock
held by stockholders of NYMEX Holdings, Inc., as of May 5,
2004 was $1,377,000,000 based upon the average of the bid and
ask price for a NYMEX Holdings, Inc. share as of May 5,
2004.





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TABLE OF CONTENTS

|                                                  |  |                                                                                           |                                                                                                                                                            |      |    |   | 
|------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | -- | - | 
|                                                  |  |                                                                                           |                                                                                                                                                            | Page
|                                                  |  |                                                                                           |                                                                                                                                                            |     
|PART I:  FINANCIAL
    INFORMATION               
|                                                 
|Item 1.                                           |  | Financial Statements                                                                      |                                                                                                                                                            |      | 2  |  
|                                                  |  |                                                                                           | Consolidated Statements of
    Income for the three months ended March 31, 2004 and 2003
    (Unaudited)                                                   |      |    | 2 | 
|                                                  |  |                                                                                           | Consolidated Balance Sheets
    as of March 31, 2004 (Unaudited) and December 31,
    2003                                                                 |      |    | 3 | 
|                                                  |  |                                                                                           | Consolidated Statements of
    Stockholders Equity for the three months ended
    March 31, 2004 (Unaudited) and for the year ended
    December 31, 2003 |      |    | 4 | 
|                                                  |  |                                                                                           | Consolidated Statements of
    Cash Flows for the three months ended March 31, 2004 and
    2003 (Unaudited)                                               |      |    | 5 | 
|                                                  |  |                                                                                           | Notes to the Unaudited
    Consolidated Financial Statements                                                                                               |      |    | 6 | 
|Item 2.                                           |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |                                                                                                                                                            |      | 15 |  
|Item 3.                                           |  | Quantitative and Qualitative
    Disclosures about Market Risk                            |                                                                                                                                                            |      | 31 |  
|Item 4.                                           |  | Controls and Procedures                                                                   |                                                                                                                                                            |      | 32 |  
|                                                 
|PART II:  OTHER
    INFORMATION                  
|                                                 
|Item 1.                                           |  | Legal Proceedings                                                                         |                                                                                                                                                            |      | 33 |  
|Item 2.                                           |  | Changes in Securities, Use
    of Proceeds and Issuer Purchases of Equity Securities      |                                                                                                                                                            |      | 33 |  
|Item 3.                                           |  | Defaults Upon Senior
    Securities                                                       |                                                                                                                                                            |      | 33 |  
|Item 4.                                           |  | Submission of Matters to a
    Vote of the Security Holders                               |                                                                                                                                                            |      | 33 |  
|Item 5.                                           |  | Other Information                                                                         |                                                                                                                                                            |      | 34 |  
|Item 6.                                           |  | Exhibits and Reports on
    Form 8-K                                                      |                                                                                                                                                            |      | 34 |  
|Signatures                                        |  |                                                                                           | 35                                                                                                                                                         |     
|EX-10.1: EMPLOYMENT AGREEMENT                    
|EX-10.2: ADVISOR SERVICES AGREEMENT              
|EX-10.3: FIRST AMENDMENT TO EMPLOYMENT AGREEMEMT 
|EX-3.1: CERTIFICATION OF THE CHAIRMAN            
|EX-31.2: CERTIFICATION OF CHIEF FINANCIAL OFFICER
|EX-32.1: CERTIFICATION OF THE CHAIRMAN           
|EX-32.2: CERTIFICATION OF CHIEF FINANCIAL OFFICER



1



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##### Table of Contents






PART I.     FINANCIAL
INFORMATION






|        |                     
|------- | --------------------
|Item 1. | Financial Statements




NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

(In thousands, except for share
data)


|                                            |                                                                                      |                      |   |        |        |  |   |        |        | 
|------------------------------------------- | ------------------------------------------------------------------------------------ | -------------------- | - | ------ | ------ |  | - | ------ | ------ | 
|                                            |                                                                                      |                     
|                                            |                                                                                      | For the Three Months
|                                            |                                                                                      | Ended March 31,     
|                                            |                                                                                      |                     
|                                            |                                                                                      | 2004                 |   | 2003  
|                                            |                                                                                      |                      |   |       
|Revenues:                                   |                                                                                      |                      |   |        |        |  |   |       
|                                            | Clearing and transaction fees, net of member
    rebates                             |                      | $ | 42,881 |        |  | $ | 39,391 |       
|                                            | Market data fees, net                                                                |                      |   | 7,693  |        |  |   | 8,394  |       
|                                            | Other, net                                                                           |                      |   | 2,663  |        |  |   | 1,840  |       
|                                            |                                                                                      |                      |   |        |        |  |   |       
|                                            |                                                                                      | Total revenues       |   |        | 53,237 |  |   |        | 49,625 | 
|                                            |                                                                                      |                      |   |        |        |  |   |       
|Expenses:                                   |                                                                                      |                      |   |        |        |  |   |       
|                                            | Salaries and employee benefits                                                       |                      |   | 13,632 |        |  |   | 13,393 |       
|                                            | Occupancy and equipment                                                              |                      |   | 5,978  |        |  |   | 7,038  |       
|                                            | Depreciation and amortization, net of deferred
    credit amortization               |                      |   | 5,291  |        |  |   | 4,722  |       
|                                            | General and administrative                                                           |                      |   | 6,498  |        |  |   | 3,544  |       
|                                            | Professional services                                                                |                      |   | 5,744  |        |  |   | 4,010  |       
|                                            | Telecommunications                                                                   |                      |   | 1,454  |        |  |   | 1,332  |       
|                                            | Marketing                                                                            |                      |   | 754    |        |  |   | 501    |       
|                                            | Other expenses                                                                       |                      |   | 2,280  |        |  |   | 1,981  |       
|                                            | Impairment and disposition loss on capitalized
    software and computer equipment   |                      |   | 64     |        |  |   | 940    |       
|                                            |                                                                                      |                      |   |        |        |  |   |       
|                                            |                                                                                      | Total expenses       |   |        | 41,695 |  |   |        | 37,461 | 
|                                            |                                                                                      |                      |   |        |        |  |   |       
|                                            | Income before investment income, interest expense
    and provision for income taxes |                      |   | 11,542 |        |  |   | 12,164 |       
|Investment income and interest
    expense: |                                                                                      |                      |   |        |        |  |   |       
|                                            | Investment income, net                                                               |                      |   | 1,300  |        |  |   | 686    |       
|                                            | Interest expense                                                                     |                      |   | 1,770  |        |  |   | 1,822  |       
|                                            |                                                                                      |                      |   |        |        |  |   |       
|                                            | Income before provision for income taxes                                             |                      |   | 11,072 |        |  |   | 11,028 |       
|                                            | Provision for income taxes                                                           |                      |   | 4,830  |        |  |   | 5,273  |       
|                                            |                                                                                      |                      |   |        |        |  |   |       
|                                            | Net income                                                                           |                      | $ | 6,242  |        |  | $ | 5,755  |       
|                                            |                                                                                      |                      |   |        |        |  |   |       
|                                            | Weighted average common shares outstanding, basic
    and diluted                    |                      |   | 816    |        |  |   | 816    |       
|                                            |                                                                                      |                      |   |        |        |  |   |       
|                                            | Basic and diluted earnings per share                                                 |                      | $ | 7,650  |        |  | $ | 7,053  |       
|                                            |                                                                                      |                      |   |        |        |  |   |       

See accompanying notes to the unaudited
consolidated financial statements.

2



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##### Table of Contents






NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share
data)


|                                           |                                                                                                                                 |                                            |   |              |         |  |   |         |         | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------------ | ------- |  | - | ------- | ------- | 
|                                           |                                                                                                                                 | March 31,                                  |   |             
|                                           |                                                                                                                                 | 2004                                       |   | December 31,
|                                           |                                                                                                                                 | (Unaudited)                                |   | 2003        
|                                           |                                                                                                                                 |                                            |   |             
|ASSETS                                    
|Current assets                             |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           | Cash and cash equivalents                                                                                                       |                                            | $ | 584          |         |  | $ | 1,763   |        
|                                           | Securities purchased under agreements to resell                                                                                 |                                            |   | 53,186       |         |  |   | 45,050  |        
|                                           | Marketable securities, at market value                                                                                          |                                            |   | 67,243       |         |  |   | 64,885  |        
|                                           | Clearing and transaction fees receivable, net of
    allowance for member credits                                               |                                            |   | 17,282       |         |  |   | 13,277  |        
|                                           | Prepaid expenses                                                                                                                |                                            |   | 4,193        |         |  |   | 4,115   |        
|                                           | Deferred tax assets                                                                                                             |                                            |   | 4,023        |         |  |   | 4,134   |        
|                                           | Margin deposits and guaranty funds                                                                                              |                                            |   | 95,285       |         |  |   | 97,238  |        
|                                           | Other current assets                                                                                                            |                                            |   | 7,699        |         |  |   | 8,959   |        
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                 | Total current assets                       |   |              | 249,495 |  |   |         | 239,421 | 
|                                           | Property and equipment, net                                                                                                     |                                            |   | 204,666      |         |  |   | 208,787 |        
|                                           | Goodwill, net of amortization                                                                                                   |                                            |   | 16,329       |         |  |   | 16,329  |        
|                                           | Other assets                                                                                                                    |                                            |   | 12,334       |         |  |   | 13,139  |        
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                 | Total assets                               |   | $            | 482,824 |  |   | $       | 477,676 | 
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                          
|LIABILITIES AND STOCKHOLDERS
    EQUITY  
|Current liabilities                        |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           | Accounts payable and accrued liabilities                                                                                        |                                            | $ | 10,524       |         |  | $ | 10,773  |        
|                                           | Accrued salaries and related liabilities                                                                                        |                                            |   | 5,589        |         |  |   | 4,292   |        
|                                           | Margin deposits and guaranty funds                                                                                              |                                            |   | 95,285       |         |  |   | 97,238  |        
|                                           | Income tax payable                                                                                                              |                                            |   | 11,661       |         |  |   | 10,364  |        
|                                           | Other current liabilities                                                                                                       |                                            |   | 16,660       |         |  |   | 17,126  |        
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                 | Total current liabilities                  |   |              | 139,719 |  |   |         | 139,793 | 
|                                           | Grant for building construction deferred credit                                                                                 |                                            |   | 112,064      |         |  |   | 112,600 |        
|                                           | Long-term debt                                                                                                                  |                                            |   | 88,732       |         |  |   | 88,732  |        
|                                           | Retirement obligation                                                                                                           |                                            |   | 11,719       |         |  |   | 11,729  |        
|                                           | Deferred income taxes                                                                                                           |                                            |   | 5,502        |         |  |   | 5,961   |        
|                                           | Other liabilities                                                                                                               |                                            |   | 13,431       |         |  |   | 13,446  |        
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                 | Total liabilities                          |   |              | 371,167 |  |   |         | 372,261 | 
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                          
|Commitments and contingencies
    (Note 9)
|Stockholders equity                       |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           | Common stock, at $0.01 par value,
    816 shares authorized, issued and outstanding at
    March 31, 2004 and December 31, 2003 |                                            |   |             |         |  |   |        |        
|                                           | Additional paid-in capital                                                                                                      |                                            |   | 93,312       |         |  |   | 93,312  |        
|                                           | Retained earnings                                                                                                               |                                            |   | 18,345       |         |  |   | 12,103  |        
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                 | Total stockholders equity                 |   |              | 111,657 |  |   |         | 105,415 | 
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                 | Total liabilities and stockholders equity |   | $            | 482,824 |  |   | $       | 477,676 | 
|                                           |                                                                                                                                 |                                            |   |              |         |  |   |        

See accompanying notes to the unaudited
consolidated financial statements.

3



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##### Table of Contents






NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

(In thousands, except for share
data)


|                                       |                            |              |     |            |  |          |   |               |  |        |        |   |  |   |        |        |   |   |         |        |  
|-------------------------------------- | -------------------------- | ------------ | --- | ---------- |  | -------- | - | ------------- |  | ------ | ------ | - |  | - | ------ | ------ | - | - | ------- | ------ | -
|                                       |                            |              |     |            |  |          |   |              
|                                       |                            | Common Stock |     | Additional |  |          |   | Total        
|                                       |                            |              |     | Paid-in    |  | Retained |   | Stockholders
|                                       |                            | Shares       |     | Amount     |  | Capital  |   | Earnings      |  | Equity
|                                       |                            |              |     |            |  |          |   |               |  |       
|Balances at January 1, 2003            |                            |              | 816 |            |  | $        |  |               |  | $      | 93,312 |   |  | $ | 8,223  |        |   | $ | 101,535 |       
|                                       | Net income                 |              |     |            |  |          |   |              |  |        |        |  |  |   |        | 8,880  |   |   |         | 8,880  |  
|Dividends declared                     |                            |              |     |            |  |          |   |               |  |        |       |   |  |   |        |        |   |   |         |       
|                                       | Common stock, $6,127/share |              |     |            |  |          |   |               |  |        |        |   |  |   |        | (5,000 | ) |   |         | (5,000 | )
|                                       |                            |              |     |            |  |          |   |               |  |        |        |   |  |   |        |        |   |   |         |       
|Balances at December 31, 2003          |                            |              | 816 |            |  |          |  |               |  |        | 93,312 |   |  |   | 12,103 |        |   |   | 105,415 |       
|                                       | Net income                 |              |     |            |  |          |   |              |  |        |        |  |  |   |        | 6,242  |   |   |         | 6,242  |  
|                                       |                            |              |     |            |  |          |   |               |  |        |        |   |  |   |        |        |   |   |         |       
|Balances at March 31, 2004 (Unaudited) |                            |              | 816 |            |  | $        |  |               |  | $      | 93,312 |   |  | $ | 18,345 |        |   | $ | 111,657 |       
|                                       |                            |              |     |            |  |          |   |               |  |        |        |   |  |   |        |        |   |   |         |       

See accompanying notes to the unaudited
consolidated financial statements.

4



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##### Table of Contents






NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(In thousands)


|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |       |         |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------- | ----- | ------ | ------ | ----- | ----- | ------- | ------- | -
|                                                     |                                                                                       |                                                                                      
|                                                     |                                                                                       | For the Three Months                                                                 
|                                                     |                                                                                       | Ended                                                                                
|                                                     |                                                                                       | March 31,                                                                            
|                                                     |                                                                                       |                                                                                      
|                                                     |                                                                                       | 2004                                                                                  |                                                          | 2003 
|                                                     |                                                                                       |                                                                                       |                                                          |      
|Cash flows from operating
    activities:            |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     | Net income                                                                            |                                                                                       | $                                                        | 6,242 |        |        | $     | 5,755 |        
|                                                     | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                       |                                                          |       |        |        |       |       |        
|                                                     |                                                                                       | Depreciation and amortization                                                         |                                                          |       | 5,616  |        |       |       | 5,258   |        
|                                                     |                                                                                       | Amortization of intangibles                                                           |                                                          |       | 211    |        |       |       |        |        
|                                                     |                                                                                       | Deferred grant credit                                                                 |                                                          |       | (661   | )      |       |       | (536    | )      
|                                                     |                                                                                       | Deferred rent                                                                         |                                                          |       | 82     |        |       |       | 198     |        
|                                                     |                                                                                       | Deferred income taxes                                                                 |                                                          |       | (348   | )      |       |       | (4,140  | )      
|                                                     |                                                                                       | Impairment and loss on disposition of capitalized
    software and computer equipment |                                                          |       | 64     |        |       |       | 940     |        
|Decrease (increase) in operating assets:             |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       | Marketable securities                                                                 |                                                          |       | (2,358 | )      |       |       | (527    | )      
|                                                     |                                                                                       | Clearing and transaction fees receivable                                              |                                                          |       | (4,005 | )      |       |       | (1,980  | )      
|                                                     |                                                                                       | Prepaid expenses                                                                      |                                                          |       | (78    | )      |       |       | 69      |        
|                                                     |                                                                                       | Margin deposits and guaranty fund assets                                              |                                                          |       | 1,953  |        |       |       | (62,307 | )      
|                                                     |                                                                                       | Other current assets                                                                  |                                                          |       | 1,260  |        |       |       | 1,441   |        
|Increase (decrease) in operating liabilities:        |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       | Accounts payable and accrued expenses                                                 |                                                          |       | (249   | )      |       |       | 163     |        
|                                                     |                                                                                       | Accrued salaries and related liabilities                                              |                                                          |       | 1,297  |        |       |       | (404    | )      
|                                                     |                                                                                       | Margin deposits and guaranty fund liabilities                                         |                                                          |       | (1,953 | )      |       |       | 62,307  |        
|                                                     |                                                                                       | Income tax payable                                                                    |                                                          |       | 1,297  |        |       |       | 9,405   |        
|                                                     |                                                                                       | Other current liabilities                                                             |                                                          |       | 2,034  |        |       |       | 3,596   |        
|                                                     |                                                                                       | Other liabilities                                                                     |                                                          |       | 28     |        |       |       | 127     |        
|                                                     |                                                                                       | Retirement obligation                                                                 |                                                          |       | (10    | )      |       |       | 91      |        
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       |                                                                                       | Net cash provided by operating activities                |       |        | 10,422 |       |       |         | 19,456  |  
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|Cash flows from investing
    activities:            |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       | (Increase) in securities purchased under
    agreements to resell                     |                                                          |       | (8,136 | )      |       |       | (7,618  | )      
|                                                     |                                                                                       | Capital expenditures                                                                  |                                                          |       | (1,559 | )      |       |       | (1,605  | )      
|                                                     |                                                                                       | (Increase) decrease in other assets                                                   |                                                          |       | 594    |        |       |       | (3,259  | )      
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       |                                                                                       | Net cash used in investing activities                    |       |        | (9,101 | )     |       |         | (12,482 | )
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|Cash flows from financing
    activities:            |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       | Dividends paid                                                                        |                                                          |       | (2,500 | )      |       |       | (5,000  | )      
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       |                                                                                       | Net cash used in financing activities                    |       |        | (2,500 | )     |       |         | (5,000  | )
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|                                                     |                                                                                       |                                                                                       | Net (decrease) increase in cash and cash
    equivalents |       |        | (1,179 | )     |       |         | 1,974   |  
|Cash and cash equivalents at beginning of
    period |                                                                                       |                                                                                       | 1,763                                                    |       |        |        | 1,014 |      
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      
|Cash and cash equivalents at end of
    period       |                                                                                       | $                                                                                     | 584                                                      |       |        | $      | 2,988 |      
|                                                     |                                                                                       |                                                                                       |                                                          |       |        |        |       |      

See accompanying notes to the unaudited
consolidated financial statements.

5



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##### Table of Contents






NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS




|   |                                                                         
|-- | ------------------------------------------------------------------------
|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 Exchange or NYMEX
Division) and the Commodity Exchange, Inc.
(COMEX or COMEX Division), which is a
wholly-owned subsidiary of the NYMEX Division. 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 the New York Mercantile Exchange carried over to the
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.



| |                                    
| | -----------------------------------
| | Significant Accounting
    Policies

The Companys accounting policies are
described in the notes of the December 31, 2003 audited
consolidated financial statements included in its Annual Report
on Form 10-K. The accounting policies that management has
identified as critical or complex accounting policies are
described starting on Page 21 of this Form 10-Q under
the caption Critical Accounting Policies.



| |                      
| | ---------------------
| | Basis of Presentation

The unaudited consolidated financial statements
include the accounts of the Company and its subsidiaries and
have been prepared in accordance with generally accepted
accounting principles. Certain reclassifications have been made
to the first quarter of 2003 unaudited consolidated financial
statements to conform to the current presentation.

The accompanying unaudited consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements and notes thereto in
Item 15(a) of NYMEX Holdings, Inc. Annual Report on
Form 10-K for the year ended December 31, 2003.
Quarterly results are not necessarily indicative of results for
any subsequent period.



| |                            
| | ---------------------------
| | Principles of Consolidation

The accompanying unaudited 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
Corporation (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.

6



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##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Earnings Per
Share

In accordance with Statement of Financial
Accounting Standards (SFAS) No. 128,
Earnings per Share,basic net earnings per common share
excludes dilution and is computed by dividing net income by the
weighted average of the Companys common shares outstanding
for the period. Diluted net earnings per common share reflect
the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock. The Company does not have common stock
equivalents, therefore, diluted earnings per share is equal to
basic earnings per share. For the three months ended
March 31, 2004 and 2003 basic and diluted earnings per
share was $7,650 and $7,053, respectively.

Recent
Accounting Pronouncements and Changes

In November 2002, the Financial Accounting
Standards Board (FASB) issued Financial Accounting
Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others(FIN No. 45). 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, 2003. The Company adopted FIN No. 45,
effective January 1, 2003. The adoption of FIN 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 FIN
No. 46R, Consolidation of Variable Interest Entities(FIN No. 46R). FIN No. 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
No. 46R replaces FIN 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 No. 46R.

2.     Collateralization

In connection with reverse repurchase agreements,
the Company receives collateral that is held in custody by the
Companys banks. At March 31, 2004, 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. At March 31, 2004 and
December 31, 2003 total collateral held was
$95.3 million and $97.2 million, respectively.

3.     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 senior unsecured obligations of the Company and
are not secured by the facility, the Companys interest
therein, or any other collateral. At March 31, 2004, the
notes payable balance was $91.6 million.

7



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##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


4.     Member Seat
Financing Program

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 the NYMEX
Division to be reimbursed for its loss of collateral. At
March 31, 2004, there were total seat loan balances of
$9.1 million and $10.7 million in securities that were
pledged against the seat loan balances.

5.     Revenue Rebate
and Fee Reduction Program

During the three months ended March 31,
2003, 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 reductions of their clearing and
transaction fees. 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. Clearing
and transaction fees were recorded net of these payments in the
unaudited consolidated statements of income. This program was
eliminated effective December 31, 2003 and therefore, there
were no fee reduction credits during the first quarter ended
March 31, 2004. Clearing and transaction fees were reduced
by $4.7 million for these payments for the three months
ended March 31, 2003.

6.     Allowance for
Doubtful Accounts and Credits

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 $425,000 at March 31, 2004. The Company believes the
likelihood of incurring material losses due to
non-collectibility is remote and that the allowance is adequate
to cover anticipated member credits.

An allowance for doubtful accounts was
established for market data accounts receivables to cover
potential non-collectible receivables as well as future
adjustments by the market data customers. At March 31,
2004, this allowance was $234,000, which the Company believes is
sufficient to cover potential bad debts and subsequent credits.
At March 31, 2004, the combined amounts due from ten
customers represented 84% of the total accounts receivable
balance.

Other revenues, which includes member booth
rental, licensing fees and equipment rentals, are recognized on
an accrual basis in the period during which the Company derives
economic value, with the exception of floor and compliance
fines, which are recognized when cash is received. The Company
has established a reserve for non-collectable receivables of
$353,000 at March 31, 2004 and believes the amount is
sufficient to cover potential bad debts and subsequent credits.

8



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##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


7.     Supplemental
Disclosures of Cash Flow Information

The following supplemental disclosures of cash
flow information for the three months ended March 31, 2004
and 2003 are as follows (in thousands):

|               |              |               |  |       |  |  |  |       | 
|-------------- | ------------ | ------------- |  | ----- |  |  |  | ----- | 
|               |              |              
|               |              | For the Three
|               |              | Months Ended 
|               |              | March 31,    
|               |              |              
|               |              | 2004          |  | 2003 
|               |              |               |  |      
|Cash paid for: |              |               |  |       |  |  |  |      
|               | Dividends    |               |  | 2,500 |  |  |  | 5,000 | 
|               |              |               |  |       |  |  |  |      
|               | Income Taxes |               |  | 3,876 |  |  |  |      | 
|               |              |               |  |       |  |  |  |      

8.     Margin
Deposits and Guaranty Funds

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.

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.

9



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##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


The following table sets forth margin deposits
and Guaranty Fund balances held by the Company on behalf of
clearing members at March 31, 2004 and December 31,
2003 (in thousands):

|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|---------------------------------------------------- |  | -------------- | --------- | ----------------- |  | ----- | ------- | -------- |  | -------- | --------- | ----- |  | - | --------- |  |  | - | ------- |  |  | - | --------- | 
|                                                     |  |                |           |                  
|                                                     |  | March 31, 2004 |           | December 31, 2003
|                                                     |  |                |           |                  
|                                                     |  | Margin         |           | Guaranty          |  | Total |         | Margin   |  | Guaranty |           | Total
|                                                     |  | Deposits       |           | Funds             |  | Funds |         | Deposits |  | Funds    |           | Funds
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |      
|Cash and securities earning
    interest for NYMEX   |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Cash                                                 |  | $              | 284       |                   |  | $     | 2,601   |          |  | $        | 2,885     |       |  | $ | 67        |  |  | $ | 81      |  |  | $ | 148       | 
|Securities held for resale                           |  |                | 92,400    |                   |  |       |        |          |  |          | 92,400    |       |  |   | 92,450    |  |  |   | 4,640   |  |  |   | 97,090    | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Total cash and securities                            |  |                | 92,684    |                   |  |       | 2,601   |          |  |          | 95,285    |       |  |   | 92,517    |  |  |   | 4,721   |  |  |   | 97,238    | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Cash and securities earning interest for
    members |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Money Market funds                                   |  |                | 2,195,720 |                   |  |       |        |          |  |          | 2,195,720 |       |  |   | 2,099,620 |  |  |   |        |  |  |   | 2,099,620 | 
|U.S. treasuries                                      |  |                | 3,702,169 |                   |  |       | 148,652 |          |  |          | 3,850,821 |       |  |   | 5,108,929 |  |  |   | 149,911 |  |  |   | 5,258,840 | 
|Letter of credits                                    |  |                | 455,152   |                   |  |       |        |          |  |          | 455,152   |       |  |   | 408,632   |  |  |   |        |  |  |   | 408,632   | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Total cash and securities                            |  |                | 6,353,041 |                   |  |       | 148,652 |          |  |          | 6,501,693 |       |  |   | 7,617,181 |  |  |   | 149,911 |  |  |   | 7,767,092 | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Total funds                                          |  | $              | 6,445,725 |                   |  | $     | 151,253 |          |  | $        | 6,596,978 |       |  | $ | 7,709,698 |  |  | $ | 154,632 |  |  | $ | 7,864,330 | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 

9.     Commitments
and Contingencies



| |                        
| | -----------------------
| | Contractual Obligations

The Company occupies premises under leases,
including a land lease, with various lessors that expire during
the years 2004 through 2069. For the three months ended
March 31, 2004 and 2003, rental expense for facilities and
land leases amounted to $0.5 million and $1.6 million,
respectively.

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 March 31,
2004, as well as an estimate of the timing in which these
commitments are expected to expire, are set forth on the
following table (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               |                               |       | 7,048     |        |           |       | 13,463  |        |       |       | 12,620 |        |   |        | 53,564 |         |   |        | 86,695 |        
|                         | Operating leases            |                               |       | 4,136     |        |           |       | 7,386   |        |       |       | 6,512  |        |   |        | 14,511 |         |   |        | 32,545 |        
|                         | Other long-term obligations |                               |       | 800       |        |           |       | 1,600   |        |       |       | 1,600  |        |   |        | 7,451  |         |   |        | 11,451 |        
|                         |                             |                               |       |           |        |           |       |         |        |       |       |        |        |   |        |        |         |   |        |       
|                         |                             | Total contractual obligations |       | $         | 14,801 |           |       | $       | 28,083 |       |       | $      | 26,366 |   |        | $      | 152,990 |   |        | $      | 222,240 | 
|                         |                             |                               |       |           |        |           |       |         |        |       |       |        |        |   |        |        |         |   |        |       



| |                     
| | --------------------
| | Financial Guarantees

The Company adopted FIN No. 45,
effective, January 1, 2003. The Company has certain
guarantee arrangements in its clearing process as well as other
financial guarantees discussed below:

10



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##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 the NYMEX
    Division to be reimbursed for its loss of collateral. At
    March 31, 2004, there were total seat loan balances of
    $9.1 million and $10.7 million in securities that were
    pledged against the seat loan balances.                                                               
|
| | The Company serves as a clearinghouse function,
    standing as a financial intermediary on every 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. As of March 31, 2004, there were no clearing
    members in default.

There were no events of default during the first
quarter of 2004 in either arrangement in which a liability
should be recognized in accordance with FIN No. 45. As
such, adoption of this pronouncement had no impact on the
Companys unaudited consolidated results of operations,
financial position, or cash flows.

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 is a description of legal
proceedings and litigation to which the Company is a party as of
March 31, 2004. 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 matter
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 action:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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: (i) a claim for purported
    violation of Section 2 of the Sherman Act, 15 U.S.C.
    § 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; (ii) a
    claim for purported violation of Section 1 of the Sherman
    Act by conspiring with certain of its members to restrain trade
    by

11



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##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | attempting to deny ICE access to NYMEX Exchange
    settlement prices; (iii) 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;
    (iv) 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 (v) 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 replea. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



|    |                  
|--- | -----------------
|10. | Segment Reporting

The Company considers operating results for two
business segments: Open Outcry and Electronic Trading and
Clearing. 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®, NYMEX ClearPortSM
Trading and NYMEX ClearPortSM Clearing. The Company
reports income on a segment basis, but does not allocate assets
or goodwill.

Financial information relating to these segments
is set forth below (in thousands):

|                              |  |                                      |        |             |  |       |       |        |  |             |        |       |  |   |        |  |  |   |       |  |  |   |        | 
|----------------------------- |  | ------------------------------------ | ------ | ----------- |  | ----- | ----- | ------ |  | ----------- | ------ | ----- |  | - | ------ |  |  | - | ----- |  |  | - | ------ | 
|                              |  |                                     
|                              |  | For the Three Months Ended March 31,
|                              |  |                                     
|                              |  |                                      |        |            
|                              |  | 2004                                 |        | 2003       
|                              |  |                                      |        |            
|                              |  |                                      |        | Electronic  |  |       |       |        |  | Electronic  |        |      
|                              |  | Open                                 |        | Trading and |  |       |       | Open   |  | Trading and |        |      
|                              |  | Outcry                               |        | Clearing    |  | Total |       | Outcry |  | Clearing    |        | Total
|                              |  |                                      |        |             |  |       |       |        |  |             |        |      
|Operating revenues            |  | $                                    | 46,849 |             |  | $     | 6,388 |        |  | $           | 53,237 |       |  | $ | 43,758 |  |  | $ | 5,867 |  |  | $ | 49,625 | 
|Depreciation and amortization |  |                                      | 4,974  |             |  |       | 317   |        |  |             | 5,291  |       |  |   | 4,189  |  |  |   | 533   |  |  |   | 4,722  | 
|Other operating expenses      |  |                                      | 34,220 |             |  |       | 2,184 |        |  |             | 36,404 |       |  |   | 31,742 |  |  |   | 997   |  |  |   | 32,739 | 
|                              |  |                                      |        |             |  |       |       |        |  |             |        |       |  |   |        |  |  |   |       |  |  |   |        | 
|Operating income              |  |                                      | 7,655  |             |  |       | 3,887 |        |  |             | 11,542 |       |  |   | 7,827  |  |  |   | 4,337 |  |  |   | 12,164 | 
|Investment income, net        |  |                                      | 1,300  |             |  |       |      |        |  |             | 1,300  |       |  |   | 686    |  |  |   |      |  |  |   | 686    | 
|Interest expense              |  |                                      | 1,770  |             |  |       |      |        |  |             | 1,770  |       |  |   | 1,822  |  |  |   |      |  |  |   | 1,822  | 
|Income tax expense            |  |                                      | 3,133  |             |  |       | 1,697 |        |  |             | 4,830  |       |  |   | 3,209  |  |  |   | 2,064 |  |  |   | 5,273  | 
|                              |  |                                      |        |             |  |       |       |        |  |             |        |       |  |   |        |  |  |   |       |  |  |   |        | 
|Net income                    |  | $                                    | 4,052  |             |  | $     | 2,190 |        |  | $           | 6,242  |       |  | $ | 3,482  |  |  | $ | 2,273 |  |  | $ | 5,755  | 
|                              |  |                                      |        |             |  |       |       |        |  |             |        |       |  |   |        |  |  |   |       |  |  |   |        | 



|    |                                          
|--- | -----------------------------------------
|11. | Members Retirement Plan and
    Benefits

The Company continues to maintain a 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; no new participants were permitted after the date
of the merger, nor were there payments made prior to
January 1, 2002. In addition, under the terms of the COMEX
merger agreement, the COMEX Division program is funded at a
minimum of $400,000 annually. The Companys contribution
may be greater than $800,000 a year, such amounts may be reduced
if actuarial assumptions indicate that full funding can be
achieved contributing less than the $800,000 per year.
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

12



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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.



|    |                                                
|--- | -----------------------------------------------
|12. | 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 its 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
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 U.S. 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 FAS No. 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 of each year.

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 March 31, 2004 and December 31, 2003
exceed the amount of the accumulated obligations.

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

|                                               |  |               |     |      |  |   |      |  
|---------------------------------------------- |  | ------------- | --- | ---- |  | - | ---- | -
|                                               |  |              
|                                               |  | For the Three
|                                               |  | Months Ended 
|                                               |  | March 31,    
|                                               |  |              
|                                               |  | 2004          |     | 2003
|                                               |  |               |     |     
|Service costs                                  |  | $             | 65  |      |  | $ | 55   |  
|Interest costs                                 |  |               | 63  |      |  |   | 62   |  
|Expected return on plan assets                 |  |               |    |      |  |   |     |  
|Amortization of prior service costs            |  |               | (14 | )    |  |   | (14  | )
|Amortization of net (gain)                     |  |               | (1  | )    |  |   | (6   | )
|                                               |  |               |     |      |  |   |      |  
|Net periodic postretirement benefit cost       |  |               | 113 |      |  |   | 97   |  
|Adjustment for prior period overstatement      |  |               |    |      |  |   | (276 | )
|                                               |  |               |     |      |  |   |      |  
|Total net periodic postretirement benefit cost |  | $             | 113 |      |  | $ | (179 | )
|                                               |  |               |     |      |  |   |      |  



|    |                 
|--- | ----------------
|13. | Subsequent Event

On April 8, 2004, the Company announced that
it had received an indication of interest from Parthenon
Capital, LLC (Parthenon), a private equity
investment firm, to acquire a potential controlling equity

13



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##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


interest in the Company. The indication of
interest stated that, under the proposed transaction, Parthenon
would purchase 60% of the equity shares in the Company in a
transaction that would include an initial cash payment and other
elements which, according to Parthenon, constitutes an
investment at an implied valuation of up to $2 million per
NYMEX Division seat. The proposal stated the transaction would
include, among other aspects, support for and preservation of
open outcry trading. The Company is in the process of evaluating
the proposal.

On April 27, 2004, the Company and ICAP, the
worlds largest interdealer broker and one of the
worlds leading electronic brokers of fixed income
securities, announced that they will launch an electronic market
in options on oil and gas inventory statistics. These
overthecounter options will be offered through an
auction process and will be cleared by the Exchange. The first
natural gas inventory auction is anticipated for June 2,
2004, ahead of the June 3, 2004 release of the gas storage
number by the Energy Information Administration of the
Department of Energy. The first oil inventory auction has not
yet been scheduled, but is anticipated for this summer.

14



---



##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

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
Company 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 Company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 the
Companys volume of approximately 139 million
contracts transacted and/or cleared on the Exchange during 2003,
the Exchange is the largest physical commodity based futures
exchange in the world and the third largest futures exchange in
the U.S.

The 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.

The COMEX Exchange 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.

NYMEX ClearPortSM Clearing is the
mechanism by which individually negotiated off-exchange trades
are submitted to the Exchange for clearing for specified
products.

Note Regarding Forward-Looking
Statements

The Company may, in discussions of its future
plans, objectives and expected performance in periodic reports
filed by the Company with the Securities and Exchange Commission
(or documents incorporated by reference therein) and in written
and oral presentations made by the Company, include projections
or other forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 or
Section 21E of the Securities Exchange Act of 1934, as
amended (the 1934 Act). Such projections and
forward-looking statements are based on assumptions, which the
Company believes are reasonable but are, by their nature,
inherently uncertain. Some of the important factors that could
cause actual results to differ from any such projections or
other forward-looking statements are discussed below, and in
other reports filed by the Company under the 1934 Act,
including under the caption Risk Factors in the
Companys December 31, 2003 Annual Report on
Form 10-K. The Companys forward-looking statements
are based on information available to the Company today, and
except as required by law, the Company undertakes no obligation
to update any forward-looking statement, whether as a result of
new information, future events or otherwise. 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 for the Company to foresee or
identify all such factors.

15



---



##### Table of Contents



Market Conditions

For the quarter ended March 31, 2004, total
futures and options trading and clearing volumes were
37.5 million contracts, a decrease of 1.2 million
contracts or 3.1% from 38.7 million contracts for the same
period last year. Increases in COMEX Division floor and
electronic trading volumes, and NYMEX ClearPortSM
Clearing volumes were more than offset by the decrease in NYMEX
Division floor and electronic trading volumes.

Provided below is a discussion of the
Companys three significant components of operations:
(i) the NYMEX Division; (ii) the COMEX Division; and
(iii) NYMEX ClearPortSM Clearing. The NYMEX
Division and COMEX Division information presented in the
following discussion excludes contracts cleared through NYMEX
ClearPortSM Clearing.



| |                                    
| | -----------------------------------
| | Energy Markets  NYMEX
    Division

For the quarter ended March 31, 2004,
futures and options traded and cleared volume for the NYMEX
Division was 27.7 million contracts, a decrease of
3.5 million contracts or 11.2% from 31.2 million
contracts for the same period last year. Futures contracts
volume for the quarter ended March 31, 2004 was
22.9 million contracts, a decrease of 1.9 million
contracts or 7.7% from 24.8 million contracts for the same
period last year and options volume was 4.7 million
contracts, a decrease of 1.7 million contracts or 26.5%
from 6.4 million contracts for the same period last year.

The following tables set forth trading and
clearing volumes and open interest 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 March 31, 2004 and 2003 for which clearing
members and their customers are obligated to the Companys
clearinghouse and are required to make or take future delivery
of the physical commodity (or in certain cases be settled by
cash), 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

(In thousands)


|                              |  |                                       |        |         |  |       |       |         |  |         |        |       |  |  |        |  |  |  |       |  |  |  |        | 
|----------------------------- |  | ------------------------------------- | ------ | ------- |  | ----- | ----- | ------- |  | ------- | ------ | ----- |  |  | ------ |  |  |  | ----- |  |  |  | ------ | 
|                              |  |                                      
|                              |  | For the Three Months Ending March 31,
|                              |  |                                      
|                              |  |                                       |        |        
|                              |  | 2004                                  |        | 2003   
|                              |  |                                       |        |        
|                              |  | Futures                               |        | Options |  | Total |       | Futures |  | Options |        | Total
|                              |  |                                       |        |         |  |       |       |         |  |         |        |      
|Light sweet crude oil         |  |                                       | 12,500 |         |  |       | 2,506 |         |  |         | 15,006 |       |  |  | 12,743 |  |  |  | 3,624 |  |  |  | 16,367 | 
|Henry Hub natural gas         |  |                                       | 3,708  |         |  |       | 1,855 |         |  |         | 5,563  |       |  |  | 5,406  |  |  |  | 2,324 |  |  |  | 7,730  | 
|N.Y. heating oil              |  |                                       | 3,354  |         |  |       | 123   |         |  |         | 3,477  |       |  |  | 3,465  |  |  |  | 207   |  |  |  | 3,672  | 
|N.Y. harbor unleaded gasoline |  |                                       | 3,124  |         |  |       | 228   |         |  |         | 3,352  |       |  |  | 3,034  |  |  |  | 234   |  |  |  | 3,268  | 
|Other                         |  |                                       | 247    |         |  |       | 10    |         |  |         | 257    |       |  |  | 149    |  |  |  | 16    |  |  |  | 165    | 
|                              |  |                                       |        |         |  |       |       |         |  |         |        |       |  |  |        |  |  |  |       |  |  |  |        | 
|Total                         |  |                                       | 22,933 |         |  |       | 4,722 |         |  |         | 27,655 |       |  |  | 24,797 |  |  |  | 6,405 |  |  |  | 31,202 | 
|                              |  |                                       |        |         |  |       |       |         |  |         |        |       |  |  |        |  |  |  |       |  |  |  |        | 

16



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##### Table of Contents



NYMEX Division Contracts Open
Interest

(In thousands)


|                              |  |              |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |       |  |  |  |       | 
|----------------------------- |  | ------------ | ----- | ------- |  | ----- | ----- | ------- |  | ------- | ----- | ----- |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                              |  |             
|                              |  | At March 31,
|                              |  |             
|                              |  |              |       |        
|                              |  | 2004         |       | 2003   
|                              |  |              |       |        
|                              |  | Futures      |       | Options |  | Total |       | Futures |  | Options |       | Total
|                              |  |              |       |         |  |       |       |         |  |         |       |      
|Light sweet crude oil         |  |              | 673   |         |  |       | 778   |         |  |         | 1,451 |       |  |  | 507   |  |  |  | 1,212 |  |  |  | 1,719 | 
|Henry Hub natural gas         |  |              | 304   |         |  |       | 588   |         |  |         | 892   |       |  |  | 346   |  |  |  | 888   |  |  |  | 1,234 | 
|N.Y. heating oil              |  |              | 155   |         |  |       | 29    |         |  |         | 184   |       |  |  | 105   |  |  |  | 44    |  |  |  | 149   | 
|N.Y. harbor unleaded gasoline |  |              | 142   |         |  |       | 59    |         |  |         | 201   |       |  |  | 92    |  |  |  | 73    |  |  |  | 165   | 
|Other                         |  |              | 50    |         |  |       | 5     |         |  |         | 55    |       |  |  | 9     |  |  |  | 9     |  |  |  | 18    | 
|                              |  |              |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |       |  |  |  |       | 
|Total                         |  |              | 1,324 |         |  |       | 1,459 |         |  |         | 2,783 |       |  |  | 1,059 |  |  |  | 2,226 |  |  |  | 3,285 | 
|                              |  |              |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |       |  |  |  |       | 



| |                      
| | ---------------------
| | Light Sweet Crude Oil

For the quarter ended March 31, 2004,
futures contract volume was 12.5 million contracts, a
decrease of 1.6% from 12.7 million contracts for the same
period last year. Options contract volume was 2.5 million
contracts, a decrease of 1.1 million contracts or 30.6%
from 3.6 million contracts. Total futures and options
contract volume was 15.0 million contracts, a decrease of
1.4 million contracts or 8.5% from 16.4 million
contracts.

The decline in options contract volume for the
quarter ended March 31, 2004 was due to lower volatility,
as global tensions eased and global oil markets stabilized. The
same period in the prior year had unusually strong levels of
volume as volatility was higher leading up to the war in Iraq.



| |                      
| | ---------------------
| | Henry Hub Natural Gas

Futures contract volume for the quarter ended
March 31, 2004 was 3.7 million contracts, a decrease
of 1.7 million contracts or 31.5% from 5.4 million
contracts for the same period last year. Options volume for the
quarter ended March 31, 2004 was 1.9 million
contracts, a decrease of 0.4 million contracts or 17.4%
from 2.3 million contracts for the same period last year.
Total futures and options contracts volume was 5.6 million
contracts, a decrease of 2.1 million contracts or 27.3%
from 7.7 million contracts for the same period last year.

For the quarter ended March 31, 2004,
natural gas futures and options volume declined compared to the
same period last year due in part to reduced supply concerns
related to winter season natural gas storage levels, which,
according to the U.S. Department of Energy, increased 46%
from a year ago. During the quarter ended March 31, 2003,
increasing supply concerns related to low natural gas storage
levels and colder weather resulted in increased futures and
options volume as compared to the first quarter of 2004.
Additionally, for the quarter ended March 31, 2004, futures
and options volume was also affected by reduced trading activity
by energy merchants seeking to address internal credit issues.



| |                     
| | --------------------
| | New York Heating Oil

Futures contract volume for the quarter ended
March 31, 2004 was 3.4 million contracts, a decrease
of 2.9% from 3.5 million contracts for the same period last
year. Options contract volume decreased 40.6% compared to the
quarter ended March 31, 2003. Total futures and options
volume was 3.5 million contracts, a decrease of 5.4% from
3.7 million contracts for the quarter ended March 31,
2003.

The quarter ended March 31, 2004 was
characterized by lower volatility in the heating oil market as
global tensions eased and the weather moderated compared to the
quarter ended March 31, 2003.



| |                                      
| | -------------------------------------
| | New York Harbor Unleaded
    Gasoline

For the quarter ended March 31, 2004,
futures contract volume was 3.1 million contracts, an
increase of 3.3% and options contract volume remained
essentially flat compared to the quarter ended March 31,
2003.

17



---



##### Table of Contents



Total futures and options volume was
3.4 million contracts, an increase of 3.0% compared to the
quarter ended March 31, 2003.


For the quarter ended March 31, 2004,
futures volume was driven by a strong consumer demand for
gasoline. Stricter Environmental Protection Agency standards
related to cleaner gasoline were responsible for reduced supply
leading to strength in the price differential between gasoline
and crude oil resulting in higher trading activity.



| |                                   
| | ----------------------------------
| | Metals Market  COMEX
    Division

For the quarter ended March 31, 2004, total
futures and options traded and cleared volume for the COMEX
Division was 7.9 million contracts, an increase of
2.0 million contracts or 33.9% from 5.9 million
contracts for the quarter ended March 31, 2003. For the
quarter ended March 31, 2004, futures contract volume was
6.4 million contracts, an increase of 1.4 million
contracts or 28.0% from 5.0 million contracts and options
volume was 1.4 million contracts, an increase of 40.0% from
1.0 million contracts for the quarter ended March 31,
2003.

COMEX Division Contracts Traded and
Cleared

(In thousands)


|                  |  |                                       |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|----------------- |  | ------------------------------------- | ----- | ------- |  | ----- | ----- | ------- |  | ------- | ----- | ----- |  |  | ----- |  |  |  | --- |  |  |  | ----- | 
|                  |  |                                      
|                  |  | For the Three Months Ending March 31,
|                  |  |                                      
|                  |  |                                       |       |        
|                  |  | 2004                                  |       | 2003   
|                  |  |                                       |       |        
|                  |  | Futures                               |       | Options |  | Total |       | Futures |  | Options |       | Total
|                  |  |                                       |       |         |  |       |       |         |  |         |       |      
|Gold              |  |                                       | 4,193 |         |  |       | 1,065 |         |  |         | 5,258 |       |  |  | 3,255 |  |  |  | 833 |  |  |  | 4,088 | 
|Silver            |  |                                       | 1,338 |         |  |       | 274   |         |  |         | 1,612 |       |  |  | 918   |  |  |  | 128 |  |  |  | 1,046 | 
|High grade copper |  |                                       | 865   |         |  |       | 84    |         |  |         | 949   |       |  |  | 752   |  |  |  | 7   |  |  |  | 759   | 
|Aluminum          |  |                                       | 29    |         |  |       |      |         |  |         | 29    |       |  |  | 30    |  |  |  |    |  |  |  | 30    | 
|                  |  |                                       |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|Total             |  |                                       | 6,425 |         |  |       | 1,423 |         |  |         | 7,848 |       |  |  | 4,955 |  |  |  | 968 |  |  |  | 5,923 | 
|                  |  |                                       |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |     |  |  |  |       | 

COMEX Division Contracts Open
Interest

(In thousands)


|                  |  |              |     |         |  |       |     |         |  |         |       |       |  |  |     |  |  |  |     |  |  |  |     | 
|----------------- |  | ------------ | --- | ------- |  | ----- | --- | ------- |  | ------- | ----- | ----- |  |  | --- |  |  |  | --- |  |  |  | --- | 
|                  |  |             
|                  |  | At March 31,
|                  |  |             
|                  |  |              |     |        
|                  |  | 2004         |     | 2003   
|                  |  |              |     |        
|                  |  | Futures      |     | Options |  | Total |     | Futures |  | Options |       | Total
|                  |  |              |     |         |  |       |     |         |  |         |       |      
|Gold              |  |              | 234 |         |  |       | 571 |         |  |         | 805   |       |  |  | 171 |  |  |  | 293 |  |  |  | 464 | 
|Silver            |  |              | 111 |         |  |       | 71  |         |  |         | 182   |       |  |  | 89  |  |  |  | 65  |  |  |  | 154 | 
|High grade copper |  |              | 83  |         |  |       | 22  |         |  |         | 105   |       |  |  | 78  |  |  |  | 3   |  |  |  | 81  | 
|Aluminum          |  |              | 9   |         |  |       |    |         |  |         | 9     |       |  |  | 8   |  |  |  |    |  |  |  | 8   | 
|                  |  |              |     |         |  |       |     |         |  |         |       |       |  |  |     |  |  |  |     |  |  |  |     | 
|Total             |  |              | 437 |         |  |       | 664 |         |  |         | 1,101 |       |  |  | 346 |  |  |  | 361 |  |  |  | 707 | 
|                  |  |              |     |         |  |       |     |         |  |         |       |       |  |  |     |  |  |  |     |  |  |  |     | 



| |     
| | ----
| | Gold

Futures contract volume for the quarter ended
March 31, 2004 was 4.2 million contracts, an increase
of 0.9 million contracts or 27.3% from 3.3 million
contracts for the same period last year. Options volume for the
quarter ended March 31, 2004 was 1.1 million
contracts, an increase of 0.3 million contracts or 37.5%
from 0.8 million contracts for the same period last year.
Total futures and options contracts volume was 5.3 million
contracts, an increase of 1.2 million contracts or 29.3%
from 4.1 million contracts for the same period last year.

18



---



##### Table of Contents



This increase in options and futures volume was
due to significant uncertainty regarding geopolitical
conditions, rapidly rising physical commodity prices and a
weakened U.S. currency, which led to increased hedging and
speculative demand for futures and options.



| |       
| | ------
| | Silver

Futures contract volume for the quarter ended
March 31, 2004 was 1.3 million contracts, an increase
of 44.4% and options volume increased by 114.1% compared to the
quarter ended March 31, 2003. For the quarter ended
March 31, 2004, total futures and options volumes was
1.6 million contracts, an increase of 0.5 million
contracts or 45.4% from 1.1 million contracts from the
quarter ended March 31, 2003.

Uncertainty regarding geopolitical conditions,
rapidly rising physical commodity prices, a weakened
U.S. currency and economic growth led to increased hedging
and speculative demand for futures and options for the quarter
ended March 31, 2004.



| |                  
| | -----------------
| | High Grade Copper

Futures contract volume for the quarter ended
March 31, 2004 increased 15.0% and options contract volume
increased to 84 thousand contracts from 7 thousand
contracts compared to the same period last year. For the quarter
ended March 31, 2004, total futures and options volumes
increased by 25.0% from the quarter ended March 31, 2003.

Strong housing starts in the U.S. 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. Rapidly declining global warehouse stocks, interruptions
in the copper supply chain and world usage of copper exceeding
production contributed to the higher volume.



| |                              
| | -----------------------------
| | NYMEX
    ClearPortSMClearing

Futures contract clearing volume for the quarter
ended March 31, 2004 was 2.0 million contracts, an
increase of 33.3% from 1.5 million contracts from the same
period last year.

While the Companys open outcry and
electronic trading venues experienced a decline in natural gas
futures and options trading volumes, there was significant
growth in natural gas clearing volume through NYMEX
ClearPortSM Clearing. The growth in NYMEX
ClearPortSM Clearing was due, in part, to traditional
over-the-counter market participants seeking credit risk
mitigation provided by the Companys clearinghouse for
off-exchange trade execution activities. In addition,
contributing to this increase was significant growth in existing
natural gas products during the current quarter and the launch
of new products, for petroleum and electricity on NYMEX
ClearPortSM Clearing subsequent to the first quarter
of 2003.

NYMEX ClearPortSM Clearing
Contracts and Open Internet

(In thousands)


|                   |  |                 |       |               |  |      |       |      |  |  |       |  |  |  |     | 
|------------------ |  | --------------- | ----- | ------------- |  | ---- | ----- | ---- |  |  | ----- |  |  |  | --- | 
|                   |  |                 |       |               |  |     
|                   |  | Contracts       |       |               |  |     
|                   |  | Cleared for the |       |               |  |     
|                   |  | Three Months    |       |              
|                   |  | Ended           |       | Open Interest
|                   |  | March 31,       |       | at March 31, 
|                   |  |                 |       |              
|                   |  | 2004            |       | 2003          |  | 2004 |       | 2003
|                   |  |                 |       |               |  |      |       |     
|Natural gas        |  |                 | 1,793 |               |  |      | 1,437 |      |  |  | 1,079 |  |  |  | 665 | 
|Electricity        |  |                 | 119   |               |  |      | 30    |      |  |  | 27    |  |  |  | 17  | 
|Petroleum products |  |                 | 116   |               |  |      | 1     |      |  |  | 59    |  |  |  | 0   | 
|Coal               |  |                 | 4     |               |  |      | 2     |      |  |  | 1     |  |  |  | 1   | 
|                   |  |                 |       |               |  |      |       |      |  |  |       |  |  |  |     | 
|Total              |  |                 | 2,032 |               |  |      | 1,470 |      |  |  | 1,166 |  |  |  | 683 | 
|                   |  |                 |       |               |  |      |       |      |  |  |       |  |  |  |     | 

19



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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. Since 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 $0.1 million and $0.1 million of
internal-use software costs during the three months ended
March 31, 2004 and 2003, respectively. These amounts are
included in property and equipment, net, in the Companys
unaudited 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.



| |                    
| | -------------------
| | Revenue Recognition



| |                                          
| | -----------------------------------------
| | 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 Exchange. During the three months
ended March 31, 2003, 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 reductions of
their clearing and transaction fees. 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. Clearing and transaction fees were recorded net of
these payments in the unaudited consolidated statements of
income. This program was eliminated effective December 31,
2003 and therefore, there were no fee reduction credits during
the first quarter ended March 31, 2004. Clearing and
transaction fees were reduced by $4.7 million for these
payments for the three months ended March 31, 2003.

Clearing and transaction fees receivable are
monies due to 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
March 31, 2004, 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 $425,000 at March 31, 2004. The Company believes the
likelihood of incurring material losses due to
non-collectibility is remote and that the allowance is adequate
to cover anticipated member credits.



| |                    
| | -------------------
| | 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
customers on behalf of subscribers. Revenues are accrued for the
current month

20



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##### Table of Contents



based on the most recent month reported by the
customers. The Company conducts periodic audits of the
information provided. Revenues derived from audit recoveries are
recognized when cash is received from the market data customers.
An allowance for doubtful accounts was established to cover
potential non-collectible customer receivables as well as future
adjustments by the market data customers. At March 31,
2004, this allowance was $234,000, which the Company believes is
sufficient to cover potential bad debts and subsequent credits.
At March 31, 2004, the combined amounts due from ten
customers represented 84% of the total accounts receivable
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® 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 floor and compliance
fines, which are recognized when cash is received. The Company
has established a reserve for non-collectable receivables of
$353,000 at March 31, 2004 and believes the amount is
sufficient to cover potential bad debts and subsequent credits.



| |                                                                   
| | ------------------------------------------------------------------
| | 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
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.

The Company is pursuing a new technology
strategy, which is designed to standardize the Companys
technology infrastructure. In conjunction with this strategy,
the functionality and useful lives of existing technology assets
were evaluated as of September 30, 2003. As a result of
this evaluation, the Company shortened the estimated useful
lives of significant components of its existing technology
infrastructure, resulting in an increase in depreciation expense
for subsequent periods.



| |                 
| | ----------------
| | 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 its 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.

For the first quarter of 2003, 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 for the Three Months
Ended March 31, 2004 and 2003



| |         
| | --------
| | Overview

Net income for the quarter ended March 31,
2004 was $6.2 million, an increase of $0.4 million or
6.9% from $5.8 million for the quarter ended March 31,
2003. This increase was the result of higher net revenues of
$3.6 million, which was offset by higher operating expenses
of $4.2 million. The increase in net revenues was due to
the elimination of the member fee rebate program, which more
than compensated for a decline in gross

21



---



##### Table of Contents



revenues from lower trading and clearing volumes.
Trading and clearing volumes in the quarter ended March 31,
2003 were stronger due to the increased volatility leading up to
the war in Iraq. The increase in operating expenses was due
primarily to general and administrative expenses related to
higher customer incentive programs designed to increase trading
and clearing volumes and premiums related to the establishment
of the Companys default insurance policy to protect the
Companys clearinghouse from a catastrophic member default.
Additional increases in operating expenses were due to
professional fees related to consulting and legal services for
on-going litigation.


The following table summarizes the components of
net income for the quarters ended March 31, 2004 and 2003
(in thousands, except for share data):

|                                             |  |                      |        |      |  |   |        | 
|-------------------------------------------- |  | -------------------- | ------ | ---- |  | - | ------ | 
|                                             |  |                     
|                                             |  | For the Three Months
|                                             |  | Ended March 31,     
|                                             |  |                     
|                                             |  | 2004                 |        | 2003
|                                             |  |                      |        |     
|Total revenues                               |  | $                    | 53,237 |      |  | $ | 49,625 | 
|Operating expenses                           |  |                      | 41,695 |      |  |   | 37,461 | 
|                                             |  |                      |        |      |  |   |        | 
|Operating income                             |  |                      | 11,542 |      |  |   | 12,164 | 
|Investment income, net                       |  |                      | 1,300  |      |  |   | 686    | 
|Interest expense                             |  |                      | 1,770  |      |  |   | 1,822  | 
|                                             |  |                      |        |      |  |   |        | 
|Net income before provision for income taxes |  |                      | 11,072 |      |  |   | 11,028 | 
|Provision for income taxes                   |  |                      | 4,830  |      |  |   | 5,273  | 
|                                             |  |                      |        |      |  |   |        | 
|Net income                                   |  | $                    | 6,242  |      |  | $ | 5,755  | 
|                                             |  |                      |        |      |  |   |        | 
|Basic and diluted earnings per share         |  | $                    | 7,650  |      |  | $ | 7,053  | 
|                                             |  |                      |        |      |  |   |        | 



| |        
| | -------
| | Revenue



| |                                   
| | ----------------------------------
| | Clearing and Transaction Fees, Net

Clearing and transaction fees were
$42.9 million for the quarter ended March 31, 2004, an
increase of $3.5 million or 8.9% from $39.4 million
for the quarter ended March 31, 2003. This increase was due
to the elimination of the Companys proprietary fee
reduction program, higher COMEX Division floor trading volumes
and an increase in both NYMEX ClearPortSM Clearing
volumes and average revenue per contract cleared. These revenue
increases were partially offset by decreases in revenue due to
lower floor trading volumes in all major NYMEX Division energy
products.

Gross revenue per contract was approximately the
same for the quarters ended March 31, 2004 and 2003, at
$1.14 per transaction. Net revenue per contract increased
for the quarter ended March 31, 2004 due to the elimination
of the proprietary fee reduction program. The following table
provides details related to clearing and transaction revenue per
contract (in thousands, except for revenue per contract):

|                                                              |                                    |                      |   |        |  |  |   |        |  
|------------------------------------------------------------- | ---------------------------------- | -------------------- | - | ------ |  |  | - | ------ | -
|                                                              |                                    |                     
|                                                              |                                    | For the Three Months
|                                                              |                                    | Ended March 31,     
|                                                              |                                    |                     
|                                                              |                                    | 2004                 |   | 2003  
|                                                              |                                    |                      |   |       
|Clearing and Transaction Fee Revenue                          |                                    |                      |   |        |  |  |   |       
|                                                              | Gross fees                         |                      | $ | 42,881 |  |  | $ | 44,049 |  
|                                                              | Propriety fee reduction program    |                      |   |       |  |  |   | (4,658 | )
|                                                              |                                    |                      |   |        |  |  |   |       
|                                                              | Clearing and transaction fees, net |                      | $ | 42,881 |  |  | $ | 39,391 |  
|                                                              |                                    |                      |   |        |  |  |   |       
|Average Clearing and Transaction Fee Revenue
    per Contract |                                    |                      |   |        |  |  |   |       
|                                                              | Gross revenue per contract         |                      | $ | 1.14   |  |  | $ | 1.14   |  
|                                                              | Impact of fee reduction program    |                      |   |       |  |  |   | (0.12  | )
|                                                              |                                    |                      |   |        |  |  |   |       
|                                                              | Revenue per contract, net          |                      | $ | 1.14   |  |  | $ | 1.02   |  
|                                                              |                                    |                      |   |        |  |  |   |       

22



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| |                 
| | ----------------
| | Market Data Fees

Market data fee revenues were $7.7 million
for the quarter ended March 31, 2004, a decrease of
$0.7 million or 8.3% from $8.4 million for the quarter
ended March 31, 2003. Revenue decreases were due primarily
to declines in the number of subscriber units, driven by the
consolidation of energy trading desks associated with
contraction of the financial services sector of the commodities
markets.



| |               
| | --------------
| | Other Revenues

Other revenues were $2.7 million, for the
quarter ended March 31, 2004, an increase of
$0.9 million or 50.0% from $1.8 million for the
quarter ended March 31, 2003. This increase was due
primarily to higher lease revenue related to the trading floor,
data center and office space being fully utilized in 2004 by the
Board of Trade of the City of New York (NYBOT).
In 2002, the Company and NYBOT entered into a lease agreement
for this space, which expires in 2013.



| |                   
| | ------------------
| | Operating Expenses



| |                               
| | ------------------------------
| | Salaries and Employee Benefits

Salaries and employee benefit expenses for the
quarter ended March 31, 2004 were $13.6 million, an
increase of $0.2 million or 1.5% from $13.4 million
for the quarter ended March 31, 2003. This increase was due
primarily to lower levels of capitalized compensation related to
software development activities and an increase in severance
costs, partially offset by a decrease in the average number of
employees as compared to the quarter ended March 31, 2003.



| |                        
| | -----------------------
| | Occupancy and Equipment

Occupancy and equipment expenses were
$6.0 million for the quarter ended March 31, 2004, a
decrease of $1.0 million or 14.3% from $7.0 million
for the quarter ended March 31, 2003, due primarily to the
additional rent and associated expenses the Company incurred in
the first quarter of 2003 maintaining a temporary disaster
recovery site. This decrease was partially offset by higher
occupancy and equipment maintenance costs at the Companys
headquarters facility and permanent disaster recovery site in
the current quarter.



| |                              
| | -----------------------------
| | Depreciation and Amortization

Depreciation and amortization expenses for the
quarter ended March 31, 2004 were $5.3 million, an
increase of $0.6 million or 12.8% from $4.7 million
for the quarter ended March 31, 2003. This increase was due
to depreciation related to the addition of telecommunication
equipment for the trading floor at the corporate headquarters,
technology and leasehold improvements to complete the
construction of the Companys permanent disaster recovery
site and a change in the estimated useful lives of certain
computer equipment. During 2004, the Company continued
development of a new technology strategy, which has been
designed to standardize 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. The change in useful
lives will result in higher annual depreciation costs in 2004
compared to 2003.



| |                           
| | --------------------------
| | General and Administrative

General and administrative expenses for the
quarter ended March 31, 2004 were $6.5 million, an
increase of $3.0 million or 85.7% from $3.5 million
for the quarter ended March 31, 2003. This increase is
attributed to the Company implementing, in the second quarter of
2003, certain programs designed to provide incentives to third
parties to establish business with the Company. In addition,
insurance expenses increased due to premiums on a default
insurance policy obtained in 2003 to provide protection to the
Companys clearinghouse

23



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##### Table of Contents



in the event of a clearing member default that
exceeds the Guaranty Fund, and the continuing effect of
increases in the costs of property and director and officer
insurance.




| |                      
| | ---------------------
| | Professional Services

Professional service expenses for the quarter
ended March 31, 2004 were $5.7 million, an increase of
$1.7 million or 42.5% from $4.0 million for the
quarter ended March 31, 2003. This increase was due
primarily to higher consulting fees related to compliance with
the Sarbanes-Oxley Act of 2002, financial and technical
consulting to support technology initiatives and expenses
related to its on-going involvement in certain litigation.



| |                   
| | ------------------
| | Telecommunications

Telecommunications expenses for the quarter ended
March 31, 2004 were $1.5 million, an increase of 15.4%
from $1.3 million for the quarter ended March 31,
2003. This increase was due to higher data and voice
communication expenses related to the Companys permanent
business recovery site in 2003.



| |          
| | ---------
| | Marketing

Marketing expenses for the quarter ended
March 31, 2004 were $0.8 million, an increase of 60.0%
for the quarter ended March 31, 2004 from $0.5 million
for the quarter ended March 31, 2003, due to the Company
hosting a major marketing event in an effort to promote the
Exchange in the first quarter of 2004.



| |               
| | --------------
| | Other Expenses

Other expenses for the quarter ended
March 31, 2004 were $2.3 million, an increase of 15.0%
from $2.0 million for the quarter ended March 31,
2003. This increase was due primarily to the higher earnings
from the COMEX Member Recognition and Retention Program
(MRRP) and charitable contributions. The earnings
for the COMEX MRRP are included in investment income, net, with
an equal and offsetting charge recorded in other expenses on the
consolidated statements of income.



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Impairment and Disposition Loss on Capitalized
    Software and Computer Equipment

The loss on disposition of assets for the quarter
ended March 31, 2004 was $0.1 million compared to
$0.9 million for the quarter ended March 31, 2003.
Future implementation of a new technology infrastructure will
render certain existing technology assets obsolete therefore the
Company anticipates additional charges for disposal of assets
will be recognized in 2004.



| |                  
| | -----------------
| | Investment Income

Investment income for the quarter ended
March 31, 2004 was $1.3 million, an increase of
$0.6 million or 85.7% from $0.7 million for the
quarter ended March 31, 2003. This increase was due
primarily to an increase in unrealized gains in fixed income
securities and a higher return on investment in the equity
accounts as compared to the same period last year.



| |                           
| | --------------------------
| | Provision for Income Taxes

The Company recorded an income tax provision of
$4.8 million for the quarter ended March 31, 2004, a
decrease of $0.5 million or 9.4% from $5.3 million for
the same period in 2003. The effective tax rate declined to
43.6% in the first quarter of 2004 from 47.8% in the first
quarter of 2003. This decrease was partially attributed to lower
federal and state statutory rates in the current quarter.
Further contributing to this decrease was the recognition of
valuation allowances related to the potential expiration of
charitable contribution carry-forwards and disallowed research
and development credits during the first quarter of 2003.

24



---



##### Table of Contents





| |                                       
| | --------------------------------------
| | Financial Condition and Cash
    Flows



| |                                
| | -------------------------------
| | Liquidity and Capital Resources

At March 31, 2004, the Company had
$121.0 million in cash and cash equivalents, securities
purchased under agreements to resell and marketable securities.
Working capital at March 31, 2004, was $109.8 million.



| |                                    
| | -----------------------------------
| | 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 leased 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.

The following table is a summary of significant
cash flow categories for the three months ended March 31,
2004 and 2003 (in thousands):

|                                            |                                         |                      |        |        |   |   |        |       | 
|------------------------------------------- | --------------------------------------- | -------------------- | ------ | ------ | - | - | ------ | ----- | 
|                                            |                                         |                     
|                                            |                                         | For the Three Months
|                                            |                                         | Ended March 31,     
|                                            |                                         |                     
|                                            |                                         | 2004                 |        | 2003  
|                                            |                                         |                      |        |       
|Net cash provided by operating activities   |                                         | $                    | 10,422 |        |   | $ | 19,456 |      
|Capital expenditures                        |                                         |                      | (1,559 | )      |   |   | (1,605 | )    
|Other net cash flows                        |                                         |                      | 594    |        |   |   | (3,259 | )    
|Increase in securities purchased for resale |                                         |                      | (8,136 | )      |   |   | (7,618 | )    
|                                            |                                         |                      |        |        |   |   |        |      
|                                            | Net change in cash and investments      |                      |        | 1,321  |   |   |        | 6,974 | 
|Dividends paid to stockholders             |                                         |                      | (2,500 | )      |   |   | (5,000 | )    
|                                            |                                         |                      |        |        |   |   |        |      
|                                            | Net change in cash and cash equivalents |                      | $      | (1,179 | ) |   | $      | 1,974 | 
|                                            |                                         |                      |        |        |   |   |        |      

Cash and cash equivalents decreased by
$1.2 million for the three months ended March 31, 2004
compared to an increase of $2.0 million for the three
months ended March 31, 2003. This decrease was attributed
to a decline in cash provided from operations, partially offset
by decreases in cash used in investing and financing activities.

Net cash provided by operating activities
includes cash inflows related to operating revenues, net of cash
outflows from operating expenses, income taxes and payments to
members and third parties under certain incentive programs.

Net cash provided by operating activities
decreased $9.1 million to $10.4 million for the
quarter ended March 31, 2004, compared to
$19.5 million for the quarter ended March 31, 2003.
The decrease was due to higher working capital requirements
related to a $3.6 million or 7% revenue increase for the
first quarter of 2004 compared to the quarter ended
March 31, 2003. A further decrease in net operating cash
was the result of higher income tax payments of
$3.9 million for the quarter ended March 31, 2004
compared to the quarter ended March 31, 2003. The Company
did not pay income taxes in the first quarter of 2003 due to the
utilization of net operating losses offsetting taxable income.

Net cash used in investing activities for the
three months ended March 31, 2004, was $9.1 million, a
$3.4 million decrease compared to $12.5 million for
the same period last year. The decrease in cash used in
investing activities was due primarily to the acquisition of
certain assets of TGFIN Holdings, Inc., a trading software
development and licensing company, for a purchase price of
$3 million in the first quarter of 2003.

Capital expenditures for the three months ended
March 31, 2004 and 2003 were approximately
$1.6 million for each such period.

25



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##### Table of Contents



Net cash used in financing activities for the
three months ended March 31, 2004 and 2003 was
$2.5 million and $5.0 million, respectively, for
payments of cash dividends to the Companys common
stockholders of $3,064 per common share and $6,127 per
common share, respectively. The Company reserves the right to
pay discretionary future dividends.

In the fourth quarter of 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 and trading
floor space on various occupancy dates during 2003. Operating
cash flows in 2004 will benefit from full-year rent receipts
under this lease.

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 March 31, 2004 and
December 31, 2003, cash and investments were as follows (in
thousands):

|                                                |  |           |         |              |  |   |         | 
|----------------------------------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                                                |  | March 31, |         | December 31,
|                                                |  | 2004      |         | 2003        
|                                                |  |           |         |             
|Cash and cash equivalents                       |  | $         | 584     |              |  | $ | 1,763   | 
|Securities purchased under agreements to resell |  |           | 53,186  |              |  |   | 45,050  | 
|Marketable securities                           |  |           | 67,243  |              |  |   | 64,885  | 
|                                                |  |           |         |              |  |   |         | 
|                                                |  | $         | 121,013 |              |  | $ | 111,698 | 
|                                                |  |           |         |              |  |   |         | 

Included in marketable securities at
March 31, 2004 are investments totaling $12.6 million
relating to the COMEX MRRP. 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 until the plan is fully
funded. Based on continued funding of $800,000 per year and
certain actuarial assumptions, the Company expects this plan to
be fully funded by 2018.

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 the NYMEX
Division to reimburse its loss of collateral. At March 31,
2004, there were total seat loan balances of $9.1 million
and $10.7 million in securities that were pledged against
the seat loan balances.



| |              
| | -------------
| | Clearinghouse

The Company serves a clearinghouse function,
standing as a financial intermediary on every 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 margin
deposits and Guaranty Funds posted by clearing members with the
Companys clearinghouse.

26



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##### Table of Contents



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 margin 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 Divisions 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 ClearPortSM Clearing. Clearing members
of the NYMEX Division and COMEX Division require their customers
to maintain deposits in accordance with Company margin
requirements. Margin 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 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 non-defaulting clearing members. During the
first quarter of 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 margin 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 margin
deposits and Guaranty Funds. The Company expects to put the
facility in place during the first half of 2004.

27



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The Company is entitled to earn interest on cash
and investment balances recorded as margin deposits and Guaranty
Funds. Such balances are included in the Companys
consolidated balance sheet, and are generally invested overnight
in securities purchased under agreements to resell. The
following table sets forth Guaranty Fund balances held by the
Company on behalf of clearing members at March 31, 2004 and
December 31, 2003 (in thousands):

|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|---------------------------------------------------- |  | -------------- | --------- | ----------------- |  | ----- | ------- | -------- |  | -------- | --------- | ----- |  | - | --------- |  |  | - | ------- |  |  | - | --------- | 
|                                                     |  |                |           |                  
|                                                     |  | March 31, 2004 |           | December 31, 2003
|                                                     |  |                |           |                  
|                                                     |  | Margin         |           | Guaranty          |  | Total |         | Margin   |  | Guaranty |           | Total
|                                                     |  | Deposits       |           | Funds             |  | Funds |         | Deposits |  | Funds    |           | Funds
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |      
|Cash and securities earning interest for
    NYMEX   |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Cash                                                 |  | $              | 284       |                   |  | $     | 2,601   |          |  | $        | 2,885     |       |  | $ | 67        |  |  | $ | 81      |  |  | $ | 148       | 
|Securities held for resale                           |  |                | 92,400    |                   |  |       |        |          |  |          | 92,400    |       |  |   | 92,450    |  |  |   | 4,640   |  |  |   | 97,090    | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Total cash and securities                            |  |                | 92,684    |                   |  |       | 2,601   |          |  |          | 95,285    |       |  |   | 92,517    |  |  |   | 4,721   |  |  |   | 97,238    | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Cash and securities earning interest for
    members |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Money Market funds                                   |  |                | 2,195,720 |                   |  |       |        |          |  |          | 2,195,720 |       |  |   | 2,099,620 |  |  |   |        |  |  |   | 2,099,620 | 
|U.S. treasuries                                      |  |                | 4,702,169 |                   |  |       | 148,652 |          |  |          | 4,850,821 |       |  |   | 5,108,929 |  |  |   | 149,911 |  |  |   | 5,258,840 | 
|Letters of credit                                    |  |                | 455,152   |                   |  |       |        |          |  |          | 455,152   |       |  |   | 408,632   |  |  |   |        |  |  |   | 408,632   | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Total cash and securities                            |  |                | 7,353,041 |                   |  |       | 148,652 |          |  |          | 7,501,693 |       |  |   | 7,617,181 |  |  |   | 149,911 |  |  |   | 7,767,092 | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 
|Total funds                                          |  | $              | 7,445,725 |                   |  | $     | 151,253 |          |  | $        | 7,596,978 |       |  | $ | 7,709,698 |  |  | $ | 154,632 |  |  | $ | 7,864,330 | 
|                                                     |  |                |           |                   |  |       |         |          |  |          |           |       |  |   |           |  |  |   |         |  |  |   |           | 



| |                         
| | ------------------------
| | Future Cash Requirements

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 March 31, 2004, as well as an estimate of
the timing in which these commitments are expected to expire,
are set forth on the following table (in thousands):

|                         |                             |                               |       |           |        |           |       |        |        |       |       |        |        |   |        |        |         |   |        |        |         | 
|------------------------ | --------------------------- | ----------------------------- | ----- | --------- | ------ | --------- | ----- | ------ | ------ | ----- | ----- | ------ | ------ | - | ------ | ------ | ------- | - | ------ | ------ | ------- | 
|                         |                             |                              
|                         |                             | Payments Due by Period       
|                         |                             |                              
|                         |                             | Less than                     |       |           |        | After 5   |       |       
|Contractual Obligations  |                             | 1 Year                        |       | 1-3 Years |        | 4-5 Years |       | Years  |        | Total
|                         |                             |                               |       |           |        |           |       |        |        |      
|Long-term debt principal |                             | $                             | 2,817 |           |        | $         | 5,634 |        |        | $     | 5,634 |        |        | $ | 77,464 |        |         | $ | 91,549 |       
|                         | Debt interest               |                               |       | 7,048     |        |           |       | 13,463 |        |       |       | 12,620 |        |   |        | 53,564 |         |   |        | 86,695 |        
|                         | Operating leases            |                               |       | 4,136     |        |           |       | 7,386  |        |       |       | 6,512  |        |   |        | 14,511 |         |   |        | 32,545 |        
|                         | Other long-term obligations |                               |       | 800       |        |           |       | 1,600  |        |       |       | 1,600  |        |   |        | 7,451  |         |   |        | 11,451 |        
|                         |                             |                               |       |           |        |           |       |        |        |       |       |        |        |   |        |        |         |   |        |       
|                         |                             | Total contractual obligations |       | $         | 14,801 |           |       | $      | 28,083 |       |       | $      | 26,366 |   |        | $      | 152,990 |   |        | $      | 222,240 | 
|                         |                             |                               |       |           |        |           |       |        |        |       |       |        |        |   |        |        |         |   |        |       

The Companys 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.



| |              
| | -------------
| | 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 Exchange 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

28



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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.


On August 6, 2003, the Company modified and
implemented new rules addressing the posting of funds for Lessee
Floor Brokers and Billing Entities where the Member ownership
interest is wholly comprised of Lessees. The purpose of the
modifications was to strengthen the overall financial integrity
and accountability of the floor brokerage business community, by
requiring Lessee Floor Brokers and Billing Entities comprised
entirely of Lessees to post funds of $100,000 as prescribed by
the Exchange. The deposited funds may be used to satisfy amounts
assessed by Exchange Arbitration Panels or other duly authorized
Exchange committees, which remain unsatisfied. The Company
maintains deposits for these lessees in cash and securities at
financial institutions approved by the Company. These deposits,
in the amount of $4.7 million, are not included on the
Companys consolidated balance sheet at March 31, 2004
and interest earned is paid monthly to each respective lessee.

Business Highlights

On February 12, 2004, the Company announced
that it established additional retail customer protections
supported, through a default insurance policy, 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 that
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 member 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.

On March 16, 2004, the stockholders of NYMEX
Holdings, Inc. elected a chairman and eight (8) additional
directors at the Companys Annual Meeting of Stockholders.
The stockholders elected Mitchell Steinhause as chairman of the
board of directors with 434 votes. The following individuals
were also elected to the Companys board of directors with
the following number of affirmative votes: Stephen
Forman (339), Kenneth Garland (405), Harley
Lippman (307), Michel Marks (271), Michael
McCallion (232), Gary Rizzi (358), Gordon
Rutledge (409) and Robert Steele (403). The
following directors term of office continued after the
annual meeting: Stephen Ardizzone, Eric Bolling, Joseph
Cicchetti, John Conheeney, Joel Faber, Melvyn Falis,
A. George Gero, David Greenberg, E. Bulkeley Griswold,
Jesse Harte, Scott Hess, Steven Karvellas, Kevin McDonnell, John
McNamara and Richard Schaeffer. On March 23, 2004, the
board of directors of the Company appointed Richard Schaeffer to
fill the year remaining on the term of the vice chairman
position vacated by Mitchell Steinhause upon
Mr. Steinhauses election as Chairman. There is
currently one (1) vacant director position on the board.



| |                                                                  
| | -----------------------------------------------------------------
| | Electronic Trading and Trade
    Clearing  NYMEX
    ClearPortSM

On February 10, 2004, the CFTC issued an
order which enables the Exchange to expand the products offered
solely for clearing utilizing NYMEX ClearPortSM
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

29



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##### Table of Contents



current energy options contracts. The Company
listed four cash-settled, European-style options in March 2004.


On March 10, 2004, the Company announced
that the 8 millionth off-Exchange contract was posted for
clearing as of March 9, 2004, through NYMEX
ClearPortSM Clearing services. Since the inception of
clearing for off-Exchange transactions on May 31, 2002, the
equivalent of 195.3 million megawatt hours of electricity,
18.67 quadrillion British thermal units (Btus) of natural gas,
160.3 million barrels of crude oil and refined products,
and 5.4 million tons of coal have been cleared through the
Exchanges clearinghouse, with a notional value of
approximately $97.8 billion. Nearly 400 companies are
registered to clear trades from a product slate of 66 energy
contracts.



| |                 
| | ----------------
| | Subsequent Event

On April 8, 2004, the Company announced that
it had received an indication of interest from Parthenon
Capital, LLC (Parthenon), a private equity
investment firm, to acquire a potential controlling equity
interest in the Company. The indication of interest stated that,
under the proposed transaction, Parthenon would
purchase 60% of the equity shares in the Company in a
transaction that would include an initial cash payment and other
elements which, according to Parthenon, constitutes an
investment at an implied valuation of up to $2 million per
NYMEX Division seat. The proposal stated the transaction would
include, among other aspects, support for and preservation of
open outcry trading. The Company is in the process of evaluating
the proposal.

On April 27, 2004, the Company and ICAP, the
worlds largest inter-dealer broker and one of the
worlds leading electronic brokers of fixed income
securities, announced that they will launch an electronic market
in options on oil and gas inventory statistics. These
over-the-counter options will be offered through an auction
process and will be cleared by the Exchange. The first natural
gas inventory auction is anticipated for June 2, 2004,
ahead of the June 3, 2004 release of the gas storage number
by the Energy Information Administration of the Department of
Energy. The first oil inventory auction has not yet been
scheduled, but is anticipated for this summer.

Responsibility for Financial
Reporting

The Companys management is responsible for
the preparation, integrity and objectivity of the unaudited
consolidated financial statements and related notes, and the
other financial information contained in this Form 10-Q.
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 unaudited consolidated
financial statements include certain amounts that are based on
managements estimates and judgments, giving due
consideration to materiality.

30



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##### Table of Contents








|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    about Market Risk

The table below provides information about the
Companys municipal bond portfolio and long-term debt
including expected principal and interest cash flows for the
years 2004 through 2009 and thereafter (in thousands):

Principal Amounts by Expected
Maturity

At March 31, 2004


|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|------------------- |  | --------- | ------ | -------- |  | ----- | ------ | ------------- |  | - | ------- |  |  |  | ----- | 
|                    |  |           |        |          |  |       |        | Weighted     
|                    |  |           |        |          |  |       |        | Average      
|Year                |  | Principal |        | Interest |  | Total |        | Interest Rate
|                    |  |           |        |          |  |       |        |              
|ASSETS              |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Municipal Bonds     |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|2004                |  | $         |       |          |  | $     |       |               |  | $ |        |  |  |  | N/A   | 
|2005                |  |           | 2,197  |          |  |       | 59     |               |  |   | 2,256   |  |  |  | 2.64% | 
|2006                |  |           | 4,349  |          |  |       | 209    |               |  |   | 4,558   |  |  |  | 4.91% | 
|2007                |  |           | 5,985  |          |  |       | 296    |               |  |   | 6,281   |  |  |  | 4.84% | 
|2008                |  |           | 9,860  |          |  |       | 431    |               |  |   | 10,291  |  |  |  | 4.37% | 
|2009 and thereafter |  |           | 23,008 |          |  |       | 1,171  |               |  |   | 24,179  |  |  |  | 4.49% | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Total               |  | $         | 45,399 |          |  | $     | 2,166  |               |  | $ | 47,565  |  |  |  |       | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Fair Value          |  | $         | 50,898 |          |  |       |        |               |  |   |         |  |  |  |       | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|                   
|LIABILITIES         |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Corporate Debt      |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|2004                |  | $         | 2,817  |          |  | $     | 7,048  |               |  | $ | 9,865   |  |  |  | 7.71% | 
|2005                |  |           | 2,817  |          |  |       | 4,836  |               |  |   | 7,653   |  |  |  | 7.71% | 
|2006                |  |           | 2,817  |          |  |       | 6,626  |               |  |   | 9,443   |  |  |  | 7.72% | 
|2007                |  |           | 2,817  |          |  |       | 6,414  |               |  |   | 9,231   |  |  |  | 7.73% | 
|2008                |  |           | 2,817  |          |  |       | 6,204  |               |  |   | 9,021   |  |  |  | 7.74% | 
|2009 and thereafter |  |           | 77,464 |          |  |       | 52,043 |               |  |   | 129,507 |  |  |  | 7.75% | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Total               |  | $         | 91,549 |          |  | $     | 83,171 |               |  | $ | 174,720 |  |  |  |       | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 

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 U.S. 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 $1.3 million and $0.7 million for the three
months ended March 31, 2004 and 2003, respectively. The
fair value of the Companys marketable securities,
including equity securities, was $67.2 million at
March 31, 2004. Based on portfolio compositions at
March 31, 2004, assuming a 10% change in market values, the
Company would have recognized losses of $6.7 million.

31



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| |     
| | ----
| | Debt

The weighted average interest rate on the
Companys long-term debt is 7.74%. 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 the Company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. The COMEX
Division provides the Companys 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 the Company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
and/or cleared 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
support 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 or 40% of such
clearing members reported regulatory 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 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 would 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 and 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 4. | Controls and Procedures

(a) Evaluation of Disclosure Controls and
Procedures. The Companys chief executive officer and
chief financial officer, after evaluating the effectiveness of
the Companys disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as
of the end of the period covered by this Quarterly Report on
Form 10-Q, have concluded that, based on such evaluation,
the Companys disclosure controls and procedures were
adequate and effective to ensure that material information
relating to the

32



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Company, including the Companys
consolidated subsidiaries, was made known to them by others
within those entities, particularly during the period in which
this Quarterly Report on Form 10-Q was being prepared.


(b) Changes in Internal Controls.
There were no changes in the Companys internal control
over financial reporting identified in connection with the
evaluation of such internal control that occurred during the
Companys last fiscal quarter that have materially
affected, or are reasonably likely to materially affect the
Companys internal control over financial reporting.




PART II:     OTHER
INFORMATION






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

On January 27, 2004, NYMEX Exchange and
plaintiffs entered into a complete settlement of the previously
disclosed litigation Enrique Rivera and Edith Rivera v.
New York Mercantile Exchange, Mark Kessloff, Les Faison,
Brian Bartichek and John Does 1-10.






|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|Item 2. | Changes in Securities, Use of Proceeds and
    Issuer Purchases of Equity Securities

Not applicable






|        |                                    
|------- | -----------------------------------
|Item 3. | Defaults Upon Senior
    Securities

Not applicable






|        |                                                            
|------- | -----------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of the
    Security Holders

On March 16, 2004, the stockholders of NYMEX
Holdings, Inc. elected a chairman and eight (8) additional
directors at the annual meeting. The stockholders elected
Mitchell Steinhause as chairman of the board of directors with
434 votes. The following individuals were also elected to the
Companys board of directors with the following number of
affirmative votes: Stephen Forman (339), Kenneth
Garland (405), Harley Lippman (307), Michel
Marks (271), Michael McCallion (232), Gary
Rizzi (358), Gordon Rutledge (409) and Robert
Steele (403). The following directors term of office
continued after the annual meeting: Stephen Ardizzone, Eric
Bolling, Joseph Cicchetti, John Conheeney, Joel Faber, Melvyn
Falis, A. George Gero, David Greenberg, E. Bulkeley
Griswold, Jesse Harte, Scott Hess, Steven Karvellas, Kevin
McDonnell, John McNamara and Richard Schaeffer. On
March 23, 2004, the board of directors of the Company
appointed Richard Schaeffer to fill the year remaining on the
term of the vice chairman position vacated by Mitchell
Steinhause upon Mr. Steinhauses election as Chairman.
There is currently one (1) vacant director position on the
board.

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|        |                  
|------- | -----------------
|Item 5. | Other Information

Not Applicable






|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits:

|     |  |                                                                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Employment Agreement between NYMEX Holdings,
    Inc., New York Mercantile Exchange, Inc. and Madeline Boyd.                                          
|10.2 |  | Advisor Services Agreement between NYMEX
    Holdings, Inc. and Vincent Viola.                                                                        
|10.3 |  | First Amendment to Employment Agreement Term
    Sheet between NYMEX Holdings, Inc., New York Mercantile
    Exchange, Inc. and J. Robert Collins, Jr.
|31.0 |  | Certifications of the Chairman and Chief
    Financial Officer pursuant to § 302 of the
    Sarbanes-Oxley Act of 2002.                               
|32.0 |  | Certifications of the Chairman and Chief
    Financial Officer pursuant to § 906 of the
    Sarbanes-Oxley Act of 2002.                               



| |     |                     
| | --- | --------------------
| | (b) | Reports on Form 8-K:

Not Applicable

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SIGNATURES

In accordance with Section 13 or 15 of the
Securities Exchange Act of 1934, the Registrant caused this
Report to be signed on its behalf by the undersigned, thereunto
duly authorized.



| |                                  
| | ---------------------------------
| | NYMEX HOLDINGS, INC.             
|
| | By: /s/ MITCHELL STEINHAUSE      
| |                                  
| | Name:  Mitchell Steinhause       
| | Title:    Chairman               
| | (Principal
    Executive Officer)

Dated: May 7, 2004



| |                                      
| | -------------------------------------
| | By: /s/ LEWIS A. RAIBLEY, III        
| |                                      
| | Name:  Lewis A. Raibley, III         
| | Title:    Chief Financial
    Officer
| | (Principal
    Financial Officer)    

Dated: May 7, 2004

35