##### 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 June 30,
    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 August 6, 2004 was 816. The
aggregate market value of NYMEX Holdings, Inc. capital stock
held by stockholders of NYMEX Holdings, Inc., as of
August 4, 2004 was $1,381,080,000 based upon the average of
the bid and ask price for a NYMEX Holdings, Inc. share as of
August 4, 2004.



---






---










TABLE OF CONTENTS

|                                  |  |                                                                                           |                                                                                                                                                         |      |    |   | 
|--------------------------------- |  | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | -- | - | 
|                                  |  |                                                                                           |                                                                                                                                                         | Page
|                                  |  |                                                                                           |                                                                                                                                                         |     
|PART I: FINANCIAL
    INFORMATION
|                                 
|Item 1.                           |  | Financial Statements                                                                      |                                                                                                                                                         |      | 2  |  
|                                  |  |                                                                                           | Consolidated Statements of
    Income for the three and six months ended June 30, 2004 and
    2003 (Unaudited)                                         |      |    | 2 | 
|                                  |  |                                                                                           | Consolidated Balance Sheets
    as of June 30, 2004 (Unaudited) and December 31,
    2003                                                               |      |    | 3 | 
|                                  |  |                                                                                           | Consolidated Statements of
    Stockholders Equity for the six months ended June 30,
    2004 (Unaudited) and for the year ended December 31,
    2003 |      |    | 4 | 
|                                  |  |                                                                                           | Consolidated Statements of
    Cash Flows for the six months ended June 30, 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 |                                                                                                                                                         |      | 16 |  
|Item 3.                           |  | Quantitative and Qualitative
    Disclosures about Market Risk                            |                                                                                                                                                         |      | 35 |  
|Item 4.                           |  | Controls and Procedures                                                                   |                                                                                                                                                         |      | 36 |  
|                                 
|PART II: OTHER
    INFORMATION   
|                                 
|Item 1.                           |  | Legal Proceedings                                                                         |                                                                                                                                                         |      | 37 |  
|Item 2.                           |  | Changes in Securities, Use
    of Proceeds and Issuer Purchases of Equity Securities      |                                                                                                                                                         |      | 38 |  
|Item 3.                           |  | Defaults upon Senior
    Securities                                                       |                                                                                                                                                         |      | 38 |  
|Item 4.                           |  | Submission of Matters to a
    Vote of the Security Holders                               |                                                                                                                                                         |      | 38 |  
|Item 5.                           |  | Other Information                                                                         |                                                                                                                                                         |      | 38 |  
|Item 6.                           |  | Exhibits and Reports on Form
    8-K                                                      |                                                                                                                                                         |      | 38 |  
|                                  |  | Signatures                                                                                |                                                                                                                                                         |      | 39 |  
|EMPLOYMENT AGREEMENT             
|CERTIFICATION                    
|CERTIFICATION                    
|CERTIFICATION                    
|CERTIFICATION                    



1



---



##### Table of Contents






PART 1. FINANCIAL INFORMATION






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




NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

(In thousands, except for share
data)


|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |        |        | 
|------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------------ | - | ---------------- | ------ | ---- | - | ------ | ------ |  | - | ------ | ------- |  | - | ------ | ------ | 
|                                            |                                                                                                       |                    |   |                 
|                                            |                                                                                                       | Three Months Ended |   | Six Months Ended
|                                            |                                                                                                       | June 30,           |   | June 30,        
|                                            |                                                                                                       |                    |   |                 
|                                            |                                                                                                       | 2004               |   | 2003             |        | 2004 |   | 2003  
|                                            |                                                                                                       |                    |   |                  |        |      |   |       
|Revenues:                                   |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Clearing and transaction fees, net of member
    rebates                                              |                    | $ | 45,734           |        |      | $ | 29,365 |        |  | $ | 88,615 |         |  | $ | 68,755 |       
|                                            | Market data fees, net                                                                                 |                    |   | 7,979            |        |      |   | 7,926  |        |  |   | 15,672 |         |  |   | 16,320 |       
|                                            | Other, net                                                                                            |                    |   | 2,746            |        |      |   | 3,746  |        |  |   | 5,409  |         |  |   | 5,587  |       
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            |                                                                                                       | Total revenues     |   |                  | 56,459 |      |   |        | 41,037 |  |   |        | 109,696 |  |   |        | 90,662 | 
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|Expenses:                                   |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Salaries and employee benefits                                                                        |                    |   | 15,370           |        |      |   | 13,176 |        |  |   | 29,002 |         |  |   | 26,569 |       
|                                            | Occupancy and equipment                                                                               |                    |   | 6,243            |        |      |   | 6,864  |        |  |   | 12,221 |         |  |   | 13,901 |       
|                                            | Depreciation and amortization, net of deferred
    credit amortization                                |                    |   | 5,253            |        |      |   | 4,743  |        |  |   | 10,544 |         |  |   | 9,465  |       
|                                            | General and administrative                                                                            |                    |   | 6,629            |        |      |   | 6,322  |        |  |   | 13,127 |         |  |   | 9,868  |       
|                                            | Professional services                                                                                 |                    |   | 6,696            |        |      |   | 5,502  |        |  |   | 12,440 |         |  |   | 9,511  |       
|                                            | Telecommunications                                                                                    |                    |   | 1,459            |        |      |   | 1,318  |        |  |   | 2,913  |         |  |   | 2,650  |       
|                                            | Marketing                                                                                             |                    |   | 483              |        |      |   | 847    |        |  |   | 1,237  |         |  |   | 1,348  |       
|                                            | Other expenses                                                                                        |                    |   | 1,542            |        |      |   | 2,395  |        |  |   | 3,822  |         |  |   | 4,376  |       
|                                            | Impairment and disposition loss on capitalized
    software and computer equipment                    |                    |   | 438              |        |      |   | 37     |        |  |   | 502    |         |  |   | 977    |       
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            |                                                                                                       | Total expenses     |   |                  | 44,113 |      |   |        | 41,204 |  |   |        | 85,808  |  |   |        | 78,665 | 
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Income (loss) before investment income, interest
    expense and provision (benefit) for income taxes |                    |   | 12,346           |        |      |   | (167   | )      |  |   | 23,888 |         |  |   | 11,997 |       
|Investment income and interest
    expense: |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Investment income (loss), net                                                                         |                    |   | (884             | )      |      |   | 2,064  |        |  |   | 416    |         |  |   | 2,750  |       
|                                            | Interest expense                                                                                      |                    |   | 1,770            |        |      |   | 1,823  |        |  |   | 3,540  |         |  |   | 3,645  |       
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Income before provision (benefit) for income taxes                                                    |                    |   | 9,692            |        |      |   | 74     |        |  |   | 20,764 |         |  |   | 11,102 |       
|                                            | Provision (benefit) for income taxes                                                                  |                    |   | 4,370            |        |      |   | (103   | )      |  |   | 9,200  |         |  |   | 5,170  |       
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Net income                                                                                            |                    | $ | 5,322            |        |      | $ | 177    |        |  | $ | 11,564 |         |  | $ | 5,932  |       
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Weighted average common shares outstanding, basic
    and diluted                                     |                    |   | 816              |        |      |   | 816    |        |  |   | 816    |         |  |   | 816    |       
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       
|                                            | Basic and diluted earnings per share                                                                  |                    | $ | 6,522            |        |      | $ | 217    |        |  | $ | 14,172 |         |  | $ | 7,270  |       
|                                            |                                                                                                       |                    |   |                  |        |      |   |        |        |  |   |        |         |  |   |       

See accompanying notes to the unaudited
consolidated financial statements.

2



---



##### Table of Contents






NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share
data)


|                                           |                                                                                                                                |                                            |   |              |         |  |   |         |         | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | - | ------------ | ------- |  | - | ------- | ------- | 
|                                           |                                                                                                                                | June 30,                                   |   |             
|                                           |                                                                                                                                | 2004                                       |   | December 31,
|                                           |                                                                                                                                | (Unaudited)                                |   | 2003        
|                                           |                                                                                                                                |                                            |   |             
|ASSETS                                    
|Current assets                             |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           | Cash and cash equivalents                                                                                                      |                                            | $ | 1,372        |         |  | $ | 1,763   |        
|                                           | Securities purchased under agreements to resell                                                                                |                                            |   | 12,644       |         |  |   | 45,050  |        
|                                           | Marketable securities, at market value                                                                                         |                                            |   | 120,123      |         |  |   | 64,885  |        
|                                           | Clearing and transaction fees receivable, net of
    allowance for member credits                                              |                                            |   | 17,451       |         |  |   | 13,277  |        
|                                           | Prepaid expenses                                                                                                               |                                            |   | 5,873        |         |  |   | 4,115   |        
|                                           | Deferred tax assets                                                                                                            |                                            |   | 4,970        |         |  |   | 4,134   |        
|                                           | Margin deposits and guaranty funds                                                                                             |                                            |   | 20,329       |         |  |   | 97,238  |        
|                                           | Other current assets                                                                                                           |                                            |   | 7,096        |         |  |   | 8,959   |        
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                | Total current assets                       |   |              | 189,858 |  |   |         | 239,421 | 
|                                           | Property and equipment, net                                                                                                    |                                            |   | 200,550      |         |  |   | 208,787 |        
|                                           | Goodwill, net of amortization                                                                                                  |                                            |   | 16,329       |         |  |   | 16,329  |        
|                                           | Other assets                                                                                                                   |                                            |   | 11,817       |         |  |   | 13,139  |        
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                | Total assets                               |   | $            | 418,554 |  |   | $       | 477,676 | 
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|                                          
|LIABILITIES AND STOCKHOLDERS
    EQUITY  
|Current liabilities                        |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           | Accounts payable and accrued liabilities                                                                                       |                                            | $ | 18,041       |         |  | $ | 10,773  |        
|                                           | Accrued salaries and related liabilities                                                                                       |                                            |   | 9,609        |         |  |   | 4,292   |        
|                                           | Margin deposits and guaranty funds                                                                                             |                                            |   | 20,329       |         |  |   | 97,238  |        
|                                           | Income tax payable                                                                                                             |                                            |   | 9,773        |         |  |   | 10,364  |        
|                                           | Other current liabilities                                                                                                      |                                            |   | 14,751       |         |  |   | 17,126  |        
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                | Total current liabilities                  |   |              | 72,503  |  |   |         | 139,793 | 
|                                           | Grant for building construction deferred credit                                                                                |                                            |   | 111,528      |         |  |   | 112,600 |        
|                                           | Long-term debt                                                                                                                 |                                            |   | 88,732       |         |  |   | 88,732  |        
|                                           | Retirement obligation                                                                                                          |                                            |   | 11,019       |         |  |   | 11,729  |        
|                                           | Deferred income taxes                                                                                                          |                                            |   | 4,383        |         |  |   | 5,961   |        
|                                           | Other liabilities                                                                                                              |                                            |   | 13,410       |         |  |   | 13,446  |        
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                | Total liabilities                          |   |              | 301,575 |  |   |         | 372,261 | 
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|Commitments and contingencies
    (Note 9) |                                                                                                                                |                                            |   |              |         |  |   |        
|Stockholders equity                       |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           | Common stock, at $0.01 par value,
    816 shares authorized, issued and outstanding at
    June 30, 2004 and December 31, 2003 |                                            |   |             |         |  |   |        |        
|                                           | Additional paid-in capital                                                                                                     |                                            |   | 93,312       |         |  |   | 93,312  |        
|                                           | Retained earnings                                                                                                              |                                            |   | 23,667       |         |  |   | 12,103  |        
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                | Total stockholders equity                 |   |              | 116,979 |  |   |         | 105,415 | 
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        
|                                           |                                                                                                                                | Total liabilities and stockholders equity |   | $            | 418,554 |  |   | $       | 477,676 | 
|                                           |                                                                                                                                |                                            |   |              |         |  |   |        

See accompanying notes to the unaudited
consolidated financial statements.

3



---



##### 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                 |              |     |            |  |          |   |              |  |        |        |  |  |   |        | 11,564 |   |   |         | 11,564 |  
|                                      |                            |              |     |            |  |          |   |               |  |        |        |   |  |   |        |        |   |   |         |       
|Balances at June 30, 2004 (Unaudited) |                            |              | 816 |            |  | $        |  |               |  | $      | 93,312 |   |  | $ | 23,667 |        |   | $ | 116,979 |       
|                                      |                            |              |     |            |  |          |   |               |  |        |        |   |  |   |        |        |   |   |         |       

See accompanying notes to the unaudited
consolidated financial statements.

4



---



##### Table of Contents






NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(In thousands)


|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |       |        |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------- | ------ | ------- | ------- | ----- | ----- | ------ | ------- | -
|                                                     |                                                                                       |                                                                                      
|                                                     |                                                                                       | Six Months Ended                                                                     
|                                                     |                                                                                       | June 30,                                                                             
|                                                     |                                                                                       |                                                                                      
|                                                     |                                                                                       | 2004                                                                                  |                                             | 2003  
|                                                     |                                                                                       |                                                                                       |                                             |       
|Cash flows from operating
    activities:            |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     | Net income                                                                            |                                                                                       | $                                           | 11,564 |         |         | $     | 5,932 |       
|                                                     | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                       |                                             |        |         |         |       |       |       
|                                                     |                                                                                       | Depreciation and amortization                                                         |                                             |        | 11,186  |         |       |       | 10,321 |        
|                                                     |                                                                                       | Amortization of intangibles                                                           |                                             |        | 430     |         |       |       | 216    |        
|                                                     |                                                                                       | Deferred grant credit                                                                 |                                             |        | (1,322  | )       |       |       | (1,322 | )      
|                                                     |                                                                                       | Deferred rent                                                                         |                                             |        | 165     |         |       |       | 287    |        
|                                                     |                                                                                       | Deferred income taxes                                                                 |                                             |        | (2,414  | )       |       |       | (4,341 | )      
|                                                     |                                                                                       | Impairment and loss on disposition of capitalized
    software and computer equipment |                                             |        | 502     |         |       |       | 977    |        
|Decrease (increase) in operating assets:             |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       | Clearing and transaction fees receivable                                              |                                             |        | (4,174  | )       |       |       | 2,697  |        
|                                                     |                                                                                       | Prepaid expenses                                                                      |                                             |        | (1,758  | )       |       |       | (2,394 | )      
|                                                     |                                                                                       | Margin deposits and guaranty fund assets                                              |                                             |        | 76,909  |         |       |       | 5,512  |        
|                                                     |                                                                                       | Other current assets                                                                  |                                             |        | 1,863   |         |       |       | (1,283 | )      
|Increase (decrease) in operating liabilities:        |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       | Accounts payable and accrued liabilities                                              |                                             |        | 7,268   |         |       |       | (951   | )      
|                                                     |                                                                                       | Accrued salaries and related liabilities                                              |                                             |        | 5,317   |         |       |       | 2,890  |        
|                                                     |                                                                                       | Margin deposits and guaranty fund liabilities                                         |                                             |        | (76,909 | )       |       |       | (5,512 | )      
|                                                     |                                                                                       | Income tax payable                                                                    |                                             |        | (591    | )       |       |       | 4,853  |        
|                                                     |                                                                                       | Other current liabilities                                                             |                                             |        | 125     |         |       |       | 1,425  |        
|                                                     |                                                                                       | Other liabilities                                                                     |                                             |        | 49      |         |       |       | 230    |        
|                                                     |                                                                                       | Retirement obligation                                                                 |                                             |        | (710    | )       |       |       | 402    |        
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       |                                                                                       | Net cash provided by operating activities   |        |         | 27,500  |       |       |        | 19,939  |  
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|Cash flows from investing
    activities:            |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       | (Increase) in marketable securities                                                   |                                             |        | (55,238 | )       |       |       | (1,140 | )      
|                                                     |                                                                                       | Decrease (increase) in securities purchased under
    agreements to resell            |                                             |        | 32,406  |         |       |       | (3,923 | )      
|                                                     |                                                                                       | Capital expenditures                                                                  |                                             |        | (3,451  | )       |       |       | (6,301 | )      
|                                                     |                                                                                       | Decrease (increase) in other assets                                                   |                                             |        | 892     |         |       |       | (3,821 | )      
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       |                                                                                       | Net cash used in investing activities       |        |         | (25,391 | )     |       |        | (15,185 | )
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|Cash flows from financing
    activities:            |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       | Dividends paid                                                                        |                                             |        | (2,500  | )       |       |       | (5,000 | )      
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       |                                                                                       | Net cash used in financing activities       |        |         | (2,500  | )     |       |        | (5,000  | )
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|                                                     |                                                                                       |                                                                                       | Net (decrease) in cash and cash equivalents |        |         | (391    | )     |       |        | (246    | )
|Cash and cash equivalents at beginning of
    period |                                                                                       |                                                                                       | 1,763                                       |        |         |         | 1,014 |      
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      
|Cash and cash equivalents at end of
    period       |                                                                                       | $                                                                                     | 1,372                                       |        |         | $       | 768   |      
|                                                     |                                                                                       |                                                                                       |                                             |        |         |         |       |      

See accompanying notes to the unaudited
consolidated financial statements.

5



---



##### Table of Contents






NYMEX HOLDINGS, INC. AND
SUBSIDIARIES

NOTES TO THE 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, selling and clearing of energy and
precious and base metals commodities for future delivery under
rules intended to protect the interests of market participants.
The Company itself generally 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 23 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 have been prepared in
accordance with accounting principles generally accepted in the
United States of America. Reclassifications are made to the
unaudited consolidated financial statements to conform to the
current presentation, when appropriate.

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 NYMEX Holdings 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



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED 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
June 30, 2004 and 2003, basic and diluted earnings per
share were $6,522 and $217, respectively. For the six months
ended June 30, 2004 and 2003, basic and diluted earnings
per share were $14,172 and $7,270, 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, 2002. 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 June 30, 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 June 30, 2004 and
December 31, 2003, the total collateral held was
$20.3 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 issuance is comprised of three series, each
with different maturity dates, 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

7



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

senior unsecured obligations of the Company and
are not secured by the facility, the Companys interest
therein, or any other collateral. At June 30, 2004, the
notes payable balance was $91.5 million.



|   |                              
|-- | -----------------------------
|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 membership
seats. 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
June 30, 2004, there were total seat loan balances of
$8.5 million and securities pledged against the seat loan
balances of $10.1 million.



|   |                                             
|-- | --------------------------------------------
|5. | Revenue Rebate and Fee Reduction
    Program

During 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, which totaled $3.5 million and
$8.1 million for the three and six months ended
June 30, 2003, respectively. This program was eliminated
effective December 31, 2003 and, as a result, there were no
fee reduction credits during the three and six months ended
June 30, 2004.



|   |                                                
|-- | -----------------------------------------------
|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 $256,000 at June 30, 2004. The Company believes the
likelihood of incurring material losses due to
non-collectibility of clearing and transaction fees 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 June 30, 2004,
this allowance was $114,000, which the Company believes is
sufficient to cover potential bad debts and subsequent credits.
At June 30, 2004, the combined amounts due from ten
customers represented 83% of the total accounts receivable
balance.

Other revenues, which include member booth
rentals, 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-collectible receivables of
$681,000 at June 30, 2004, and believes the amount is
sufficient to cover potential bad debts and subsequent credits.

8



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                                      
|-- | -----------------------------------------------------
|7. | Supplemental Disclosures of Cash Flow
    Information

The following supplemental disclosures of cash
flow information for the six months ended June 30, 2004 and
2003 are as follows (in thousands):

|               |              |                  |   |        |  |  |   |       | 
|-------------- | ------------ | ---------------- | - | ------ |  |  | - | ----- | 
|               |              |                 
|               |              | Six Months Ended
|               |              | June 30,        
|               |              |                 
|               |              | 2004             |   | 2003  
|               |              |                  |   |       
|Cash paid for: |              |                  |   |        |  |  |   |      
|               | Interest     |                  | $ | 3,524  |  |  | $ | 3,629 | 
|               |              |                  |   |        |  |  |   |      
|               | Income taxes |                  | $ | 12,267 |  |  | $ | 4,657 | 
|               |              |                  |   |        |  |  |   |      



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

The Company is entitled to earn interest on cash
balances posted as margin 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



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED 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 June 30, 2004 and December 31,
2003 (in thousands):

|                                                     |  |               |           |                   |  |             |         |          |  |          |           |             |  |   |           |  |  |   |         |  |  |   |           | 
|---------------------------------------------------- |  | ------------- | --------- | ----------------- |  | ----------- | ------- | -------- |  | -------- | --------- | ----------- |  | - | --------- |  |  | - | ------- |  |  | - | --------- | 
|                                                     |  |               |           |                  
|                                                     |  | June 30, 2004 |           | December 31, 2003
|                                                     |  |               |           |                  
|                                                     |  | Margin        |           | Guaranty          |  |             |         | Margin   |  | Guaranty |           |            
|                                                     |  | Deposits      |           | Funds             |  | Total Funds |         | Deposits |  | Funds    |           | Total Funds
|                                                     |  |               |           |                   |  |             |         |          |  |          |           |            
|Cash and securities earning interest for
    NYMEX   |  |               |           |                   |  |             |         |          |  |          |           |             |  |   |           |  |  |   |         |  |  |   |           | 
|Cash                                                 |  | $             | 23        |                   |  | $           | 1       |          |  | $        | 24        |             |  | $ | 67        |  |  | $ | 81      |  |  | $ | 148       | 
|Securities held for resale                           |  |               | 13,870    |                   |  |             | 6,435   |          |  |          | 20,305    |             |  |   | 92,450    |  |  |   | 4,640   |  |  |   | 97,090    | 
|                                                     |  |               |           |                   |  |             |         |          |  |          |           |             |  |   |           |  |  |   |         |  |  |   |           | 
|Total cash and securities                            |  |               | 13,893    |                   |  |             | 6,436   |          |  |          | 20,329    |             |  |   | 92,517    |  |  |   | 4,721   |  |  |   | 97,238    | 
|                                                     |  |               |           |                   |  |             |         |          |  |          |           |             |  |   |           |  |  |   |         |  |  |   |           | 
|Cash and securities earning interest for
    members |  |               |           |                   |  |             |         |          |  |          |           |             |  |   |           |  |  |   |         |  |  |   |           | 
|Money market funds                                   |  |               | 2,613,520 |                   |  |             |        |          |  |          | 2,613,520 |             |  |   | 2,099,620 |  |  |   |        |  |  |   | 2,099,620 | 
|U.S. treasuries                                      |  |               | 4,463,306 |                   |  |             | 147,536 |          |  |          | 4,610,842 |             |  |   | 5,108,929 |  |  |   | 149,911 |  |  |   | 5,258,840 | 
|Letters of credit                                    |  |               | 399,272   |                   |  |             |        |          |  |          | 399,272   |             |  |   | 408,632   |  |  |   |        |  |  |   | 408,632   | 
|                                                     |  |               |           |                   |  |             |         |          |  |          |           |             |  |   |           |  |  |   |         |  |  |   |           | 
|Total cash and securities                            |  |               | 7,476,098 |                   |  |             | 147,536 |          |  |          | 7,623,634 |             |  |   | 7,617,181 |  |  |   | 149,911 |  |  |   | 7,767,092 | 
|                                                     |  |               |           |                   |  |             |         |          |  |          |           |             |  |   |           |  |  |   |         |  |  |   |           | 
|Total funds                                          |  | $             | 7,489,991 |                   |  | $           | 153,972 |          |  | $        | 7,643,963 |             |  | $ | 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
June 30, 2004 and 2003, rental expense for facilities and
the land lease amounted to $0.5 million and
$1.1 million, respectively. For the six months ended
June 30, 2004 and 2003, rental expense for facilities and
the land lease amounted to $1.0 million and
$2.7 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 June 30,
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     |       |        
|                         |                             | 1 Year                        |       | 1-3 Years |        | 4-5 Years |       | 5 Years |        | Total
|                         |                             |                               |       |           |        |           |       |         |        |      
|Contractual Obligations  |                             |                               |       |           |        |           |       |         |        |       |       |        |        |   |        |        |         |   |        |       
|Long-term debt principal |                             | $                             | 2,817 |           |        | $         | 5,634 |         |        | $     | 5,634 |        |        | $ | 77,464 |        |         | $ | 91,549 |       
|                         | Debt interest               |                               |       | 6,942     |        |           |       | 13,252  |        |       |       | 12,409 |        |   |        | 50,568 |         |   |        | 83,171 |        
|                         | Operating leases            |                               |       | 4,192     |        |           |       | 7,195   |        |       |       | 6,573  |        |   |        | 10,055 |         |   |        | 28,015 |        
|                         | Other long-term obligations |                               |       | 800       |        |           |       | 1,600   |        |       |       | 1,600  |        |   |        | 8,251  |         |   |        | 12,251 |        
|                         |                             |                               |       |           |        |           |       |         |        |       |       |        |        |   |        |        |         |   |        |       
|                         |                             | Total contractual obligations |       | $         | 14,751 |           |       | $       | 27,681 |       |       | $      | 26,216 |   |        | $      | 146,338 |   |        | $      | 214,986 | 
|                         |                             |                               |       |           |        |           |       |         |        |       |       |        |        |   |        |        |         |   |        |       

10



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                     
| | --------------------
| | 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:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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
    June 30, 2004, there were total seat loan balances of
    $8.5 million and $10.1 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 margin
    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 June 30, 2004, there were no clearing members in
    default.
|
| | There were no events of default during the first
    and second quarters 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

Set forth below is a description of material
litigation to which the Company is a party, as of June 30,
2004. Although there can be no assurance as to the ultimate
outcome, the Company believes it has meritorious defenses and is
vigorously defending each matter described below. The final
outcome of any litigation, however, cannot be predicted with
certainty, and an adverse resolution of these matters could 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, Inc. v.
    IntercontinentalExchange, Inc.On
    November 20, 2002, NYMEX Exchange commenced an action in
    United States District Court for the Southern District of New
    York against IntercontinentalExchange, Inc. (ICE).
    The amended complaint alleges claims for (a) copyright
    infringement by ICE arising out of ICEs uses of certain
    NYMEX Exchange settlement prices; (b) service mark
    infringement by reason of use by ICE of the service marks NYMEX
    and NEW YORK MERCANTILE EXCHANGE, (c) violation of
    trademark anti-dilution statutes, and (d) interference with
    contractual relationships. On January 6, 2003, ICE served
    an Answer and Counterclaims, in which ICE alleges five
    counterclaims against NYMEX Exchange as follows: (1) a
    claim for purported violation of Section 2 of the Sherman
    Act, 15 U.S.C. § 2, for NYMEX Exchanges
    allegedly trying to maintain a monopoly in the execution of the
    North America energy futures and expand the alleged monopoly
    into the execution and clearing of North American OTC energy
    contracts by attempting to deny ICE access to NYMEX Exchange
    settlement prices; (2) a claim for purported

11



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | violation of Section 1 of the Sherman Act by
    conspiring with certain of its members to restrain trade by
    attempting to deny ICE access to NYMEX Exchange settlement
    prices; (3) a claim for alleged violation of Section 2
    of the Sherman Act by NYMEX Exchange purportedly denying ICE
    access to NYMEX Exchanges settlement prices which are
    allegedly an essential facility; (4) a claim
    for purported violation of Section 1 of the Sherman Act and
    Section 3 of the Clayton Act by NYMEX Exchange allegedly
    tying execution services for North American energy futures and
    options to clearing services; and (5) a claim for purported
    violation of the Lanham Act through false advertising with
    respect to certain services offered by NYMEX Exchange and
    services offered by ICE. The counterclaims request damages and
    trebled damages in amounts not specified yet by ICE in addition
    to injunctive and declaratory relief. NYMEX Exchanges
    response to the counterclaims was served on February 26,
    2003.                                           
|
| | On August 11, 2003, the Court issued an
    opinion dismissing certain counterclaims and one affirmative
    defense, with leave to replead. On about August 28, 2003,
    NYMEX Exchange was served with ICEs First Amended
    Counterclaims in which ICE made four counterclaims against NYMEX
    Exchange principally alleging violations of U.S. antitrust
    laws, including claims regarding monopoly leveraging.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | By Order and Opinion dated June 30, 2004,
    the Court granted NYMEX Exchanges motion and dismissed all
    of the antitrust counterclaims asserted against NYMEX Exchange.
    This case is ongoing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | The Company is defending counterclaims filed
    against it by the defendant in the following legal action:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | New York Mercantile Exchange, Inc. v. Kai
    Neumann and Codeland, Inc.On
    May 18, 2004, NYMEX Exchange commenced an action in New
    York State Supreme Court. This action arises from
    defendants alleged unauthorized use of computer software
    and other subject matter proprietary to NYMEX Exchange, and
    asserts causes of action for, among other things, trade secret
    misappropriation, fraudulent misrepresentation, and breach of
    fiduciary duties. On June 25, 2004, defendants Neumann and
    Codeland answered the complaint and interposed several
    counterclaims against NYMEX Exchange that include causes of
    action for breach of contract and theft of trade secrets. These
    counterclaims seek, among other things, $13,000,000 in
    compensatory damages, $10,000,000 in punitive damages, as well
    as injunctive relief and additional damages for back pay, front
    pay, lost fringe benefits, and reinstatement of Neumanns
    employment. NYMEX Exchanges time to reply, move or
    otherwise respond to these Counterclaims is currently
    September 3, 2004.



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

12



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                              |                  |                                          |        |                        |  |              |        |            |  |              |       |            |  |   |        |       |  |   |        |        |  |   |         |        | 
|----------------------------- | ---------------- | ---------------------------------------- | ------ | ---------------------- |  | ------------ | ------ | ---------- |  | ------------ | ----- | ---------- |  | - | ------ | ----- |  | - | ------ | ------ |  | - | ------- | ------ | 
|                              |                  |                                         
|                              |                  | Three and Six Months Ended June 30, 2004
|                              |                  |                                         
|                              |                  |                                          |        |                        |  |             
|                              |                  |                                          |        | Electronic Trading and |  |             
|                              |                  | Open Outcry                              |        | Clearing               |  | Total       
|                              |                  |                                          |        |                        |  |             
|                              |                  | Three Months                             |        | Six Months             |  | Three Months |        | Six Months |  | Three Months |       | Six Months
|                              |                  |                                          |        |                        |  |              |        |            |  |              |       |           
|Operating revenues            |                  | $                                        | 49,684 |                        |  | $            | 96,532 |            |  | $            | 6,775 |            |  | $ | 13,164 |       |  | $ | 56,459 |        |  | $ | 109,696 |       
|Depreciation and amortization |                  |                                          | 4,938  |                        |  |              | 9,911  |            |  |              | 315   |            |  |   | 633    |       |  |   | 5,253  |        |  | $ | 10,544  |       
|Other operating expenses      |                  |                                          | 36,528 |                        |  |              | 70,748 |            |  |              | 2,332 |            |  |   | 4,516  |       |  |   | 38,860 |        |  |   | 75,264  |       
|                              |                  |                                          |        |                        |  |              |        |            |  |              |       |            |  |   |        |       |  |   |        |        |  |   |         |       
|                              | Operating income |                                          |        | 8,218                  |  |              |        | 15,873     |  |              |       | 4,128      |  |   |        | 8,015 |  |   |        | 12,346 |  |   |         | 23,888 | 
|Investment income (loss), net |                  |                                          | (884   | )                      |  |              | 416    |            |  |              |      |            |  |   |       |       |  |   | (884   | )      |  |   | 416     |       
|Interest expense              |                  |                                          | 1,770  |                        |  |              | 3,540  |            |  |              |      |            |  |   |       |       |  |   | 1,770  |        |  |   | 3,540   |       
|Provision for income taxes    |                  |                                          | 2,508  |                        |  |              | 5,641  |            |  |              | 1,862 |            |  |   | 3,559  |       |  |   | 4,370  |        |  |   | 9,200   |       
|                              |                  |                                          |        |                        |  |              |        |            |  |              |       |            |  |   |        |       |  |   |        |        |  |   |         |       
|                              | Net income       |                                          | $      | 3,055                  |  |              | $      | 7,108      |  |              | $     | 2,267      |  |   | $      | 4,456 |  |   | $      | 5,322  |  |   | $       | 11,564 | 
|                              |                  |                                          |        |                        |  |              |        |            |  |              |       |            |  |   |        |       |  |   |        |        |  |   |         |       

|                                     |                         |                                          |        |                        |   |              |        |            |  |              |       |            |  |   |       |       |  |   |        |      |   |   |        |        | 
|------------------------------------ | ----------------------- | ---------------------------------------- | ------ | ---------------------- | - | ------------ | ------ | ---------- |  | ------------ | ----- | ---------- |  | - | ----- | ----- |  | - | ------ | ---- | - | - | ------ | ------ | 
|                                     |                         |                                         
|                                     |                         | Three and Six Months Ended June 30, 2003
|                                     |                         |                                         
|                                     |                         |                                          |        |                        |   |             
|                                     |                         |                                          |        | Electronic Trading and |   |             
|                                     |                         | Open Outcry                              |        | Clearing               |   | Total       
|                                     |                         |                                          |        |                        |   |             
|                                     |                         | Three Months                             |        | Six Months             |   | Three Months |        | Six Months |  | Three Months |       | Six Months
|                                     |                         |                                          |        |                        |   |              |        |            |  |              |       |           
|Operating revenues                   |                         | $                                        | 36,674 |                        |   | $            | 80,432 |            |  | $            | 3,919 |            |  | $ | 9,786 |       |  | $ | 41,037 |      |   | $ | 90,662 |       
|Depreciation and amortization        |                         |                                          | 4,269  |                        |   |              | 8,463  |            |  |              | 474   |            |  |   | 1,002 |       |  |   | 4,743  |      |   |   | 9,465  |       
|Other operating expenses             |                         |                                          | 35,525 |                        |   |              | 67,262 |            |  |              | 492   |            |  |   | 1,494 |       |  |   | 36,461 |      |   |   | 69,200 |       
|                                     |                         |                                          |        |                        |   |              |        |            |  |              |       |            |  |   |       |       |  |   |        |      |   |   |        |       
|                                     | Operating income (loss) |                                          |        | (3,120                 | ) |              |        | 4,707      |  |              |       | 2,953      |  |   |       | 7,290 |  |   |        | (167 | ) |   |        | 11,997 | 
|Investment income, net               |                         |                                          | 2,064  |                        |   |              | 2,750  |            |  |              |      |            |  |   |      |       |  |   | 2,064  |      |   |   | 2,750  |       
|Interest expense                     |                         |                                          | 1,823  |                        |   |              | 3,645  |            |  |              |      |            |  |   |      |       |  |   | 1,823  |      |   |   | 3,645  |       
|Provision (benefit) for income taxes |                         |                                          | (1,476 | )                      |   |              | 1,671  |            |  |              | 1,373 |            |  |   | 3,499 |       |  |   | (103   | )    |   |   | 5,170  |       
|                                     |                         |                                          |        |                        |   |              |        |            |  |              |       |            |  |   |       |       |  |   |        |      |   |   |        |       
|                                     | Net income (loss)       |                                          | $      | (1,403                 | ) |              | $      | 2,141      |  |              | $     | 1,580      |  |   | $     | 3,791 |  |   | $      | 177  |   |   | $      | 5,932  | 
|                                     |                         |                                          |        |                        |   |              |        |            |  |              |       |            |  |   |       |       |  |   |        |      |   |   |        |       



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

The Company continues to maintain a retirement
and benefit plan for certain members of the COMEX Division under
the COMEX Members Recognition and Retention Program
(MRRP). The annual benefit payments are $12,500
($2,000 for options members) for 10 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. The Company is required to fund the 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 the
plan to be fully funded in 2018. Corporate contributions and
related investment earnings are charged against current
operations. All benefits to be paid under the COMEX MRRP shall
be based upon reasonable actuarial assumptions which, in turn,
are based upon the amounts that are available and are expected
to be available to pay benefits, except that the benefits paid
to any individual will not exceed the amounts stated above.
Quarterly distributions from the program began in the second
quarter of 2002. Subject to the foregoing, the board of
directors of the Company reserves the right to amend or
terminate the COMEX MRRP upon an affirmative vote of 60% of the
eligible COMEX Division plan participants.

13



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                
|--- | -----------------------------------------------
|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 June 30, 2004 and December 31, 2003
exceeds 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 |     | For the Six 
|                                             |  | Months Ended  |     | Months Ended
|                                             |  | June 30,      |     | June 30,    
|                                             |  |               |     |             
|                                             |  | 2004          |     | 2003         |  | 2004 |      | 2003
|                                             |  |               |     |              |  |      |      |     
|Service costs                                |  | $             | 65  |              |  | $    | 55   |      |  | $ | 130 |   |  | $ | 110  |  
|Interest costs                               |  |               | 63  |              |  |      | 61   |      |  |   | 126 |   |  |   | 123  |  
|Expected return on plan assets               |  |               |    |              |  |      |     |      |  |   |    |   |  |   |     |  
|Amortization of prior service costs          |  |               | (14 | )            |  |      | (15  | )    |  |   | (28 | ) |  |   | (29  | )
|Amortization of net (gain)                   |  |               | (1  | )            |  |      | (6   | )    |  |   | (2  | ) |  |   | (12  | )
|                                             |  |               |     |              |  |      |      |      |  |   |     |   |  |   |      |  
|Net periodic postretirement benefit cost     |  |               | 113 |              |  |      | 95   |      |  |   | 226 |   |  |   | 192  |  
|Adjustment for prior period overstatement    |  |               |    |              |  |      | (275 | )    |  |   |    |   |  |   | (551 | )
|                                             |  |               |     |              |  |      |      |      |  |   |     |   |  |   |      |  
|Total net period postretirement benefit cost |  | $             | 113 |              |  | $    | (180 | )    |  | $ | 226 |   |  | $ | (359 | )
|                                             |  |               |     |              |  |      |      |      |  |   |     |   |  |   |      |  



|    |                  
|--- | -----------------
|13. | Subsequent Events

On July 7, 2004, the board of directors of
the Company voted to declare and distribute a dividend of
$2.5 million to stockholders of record as of July 15,
2004. The dividend is the fourth issued by the Company since its
demutualization in November 2000.

The Company and its president, J. Robert
Collins, Jr., mutually agreed to not renew
Mr. Collins employment agreement, which expired on
June 30, 2004. The Company recorded a $2.2 million
charge in June 2004 for amounts due Mr. Collins under the
non-renewal provisions of his employment agreement. On

14



---



##### Table of Contents



NYMEX HOLDINGS, INC. AND
SUBSIDIARIES


NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

July 9, 2004, the Company announced that
Dr. James E. Newsome accepted the position of president of
the Company, effective August 2, 2004. Dr. Newsome had
been Chairman of the Commodity Futures Trading Commission
(CFTC) since Senate confirmation in December 2001.
He served as a Commissioner of the CFTC since August 1998.

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. Parthenon and the Company engaged in
due diligence and had preliminary discussions as to the
structure of a proposed deal. Based on these discussions, the
board of directors of the Company determined on August 4,
2004 not to currently pursue a transaction with Parthenon.

15



---



##### 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 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 of specified
products. The ClearPortSM system enables market
participants to take advantage of the financial depth and
security of the NYMEX Exchange clearinghouse along with access
to more than 60 energy futures contracts.

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 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 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.

16



---



##### Table of Contents



Market Conditions

For the three months ended June 30, 2004,
the volume of total futures and options contracts traded and
cleared was 41.4 million contracts, an increase of
9.2 million contracts or 28.6% from 32.2 million
contracts for the same period last year.

For the six months ended June 30, 2004, the
volume of total futures and options contracts traded and cleared
was 80.0 million contracts, an increase of 7.6 million
contracts or 10.5% from 72.4 million contracts for the same
period last year.

Provided below is a discussion of the
Companys three significant components of trading and
clearing 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.

Trading and clearing volumes discussed in this
managements discussion and analysis are expressed as
round-turns, which are matched buys and sells of the
underlying contracts. These volumes include futures settlement
and options exercise transactions for which transaction fees are
assessed. Prior to the filing of this second quarter 2004
Form 10-Q, the Company did not include settlement and
exercise volumes in its volume disclosures. Accordingly, prior
period volume information has been adjusted to include such
transactions for comparative purposes. Open interest represents
the number of contracts at June 30, 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.



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

For the three months ended June 30, 2004,
the volume of futures and options contracts traded and cleared
on the NYMEX Division was 30.8 million contracts, an
increase of 5.6 million contracts or 22.2% from
25.2 million contracts for the same period last year.
Futures contracts volume was 25.3 million contracts, an
increase of 4.8 million contracts or 23.4% from
20.5 million contracts for the same period last year.
Options contracts volume was 5.5 million contracts, an
increase of 0.8 million contracts or 17.0% from
4.7 million contracts for the same period last year.

For the six months ended June 30, 2004, the
volume of futures and options contracts traded and cleared on
the NYMEX Division was 59.3 million contracts, an increase
of 1.5 million contracts or 2.6% from 57.8 million
contracts for the same period last year. Futures contracts
volume was 48.7 million contracts, an increase of
2.7 million contracts or 5.9% from 46.0 million
contracts for the same period last year. Options contracts
volume was 10.6 million contracts, a decrease of
1.3 million contracts or 10.9% from 11.9 million
contracts for the same period last year.

17



---



##### Table of Contents



The following tables set forth trading and
clearing volumes and open interest for the Companys major
energy futures and options products.

NYMEX Division Contracts Traded and
Cleared

(In thousands)


|                              |  |                                     |        |         |  |       |       |         |  |         |        |       |  |  |        |  |  |  |       |  |  |  |        | 
|----------------------------- |  | ----------------------------------- | ------ | ------- |  | ----- | ----- | ------- |  | ------- | ------ | ----- |  |  | ------ |  |  |  | ----- |  |  |  | ------ | 
|                              |  |                                    
|                              |  | For the Three Months Ended June 30,
|                              |  |                                    
|                              |  |                                     |        |        
|                              |  | 2004                                |        | 2003   
|                              |  |                                     |        |        
|Quarterly Comparison          |  | Futures                             |        | Options |  | Total |       | Futures |  | Options |        | Total
|                              |  |                                     |        |         |  |       |       |         |  |         |        |      
|Light sweet crude oil         |  |                                     | 13,493 |         |  |       | 2,929 |         |  |         | 16,422 |       |  |  | 10,454 |  |  |  | 2,299 |  |  |  | 12,753 | 
|Henry Hub natural gas         |  |                                     | 4,763  |         |  |       | 1,919 |         |  |         | 6,682  |       |  |  | 4,616  |  |  |  | 2,074 |  |  |  | 6,690  | 
|N.Y. heating oil              |  |                                     | 3,032  |         |  |       | 105   |         |  |         | 3,137  |       |  |  | 2,391  |  |  |  | 131   |  |  |  | 2,522  | 
|N.Y. harbor unleaded gasoline |  |                                     | 3,605  |         |  |       | 377   |         |  |         | 3,982  |       |  |  | 2,820  |  |  |  | 182   |  |  |  | 3,002  | 
|Other                         |  |                                     | 409    |         |  |       | 181   |         |  |         | 590    |       |  |  | 188    |  |  |  | 58    |  |  |  | 246    | 
|                              |  |                                     |        |         |  |       |       |         |  |         |        |       |  |  |        |  |  |  |       |  |  |  |        | 
|Total                         |  |                                     | 25,302 |         |  |       | 5,511 |         |  |         | 30,813 |       |  |  | 20,469 |  |  |  | 4,744 |  |  |  | 25,213 | 
|                              |  |                                     |        |         |  |       |       |         |  |         |        |       |  |  |        |  |  |  |       |  |  |  |        | 

NYMEX Division Contracts Traded and
Cleared

(In thousands)


|                              |  |                                   |        |         |  |       |        |         |  |         |        |       |  |  |        |  |  |  |        |  |  |  |        | 
|----------------------------- |  | --------------------------------- | ------ | ------- |  | ----- | ------ | ------- |  | ------- | ------ | ----- |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|                              |  |                                  
|                              |  | For the Six Months Ended June 30,
|                              |  |                                  
|                              |  |                                   |        |        
|                              |  | 2004                              |        | 2003   
|                              |  |                                   |        |        
|Year-to-Date Comparison       |  | Futures                           |        | Options |  | Total |        | Futures |  | Options |        | Total
|                              |  |                                   |        |         |  |       |        |         |  |         |        |      
|Light sweet crude oil         |  |                                   | 26,223 |         |  |       | 5,513  |         |  |         | 31,736 |       |  |  | 23,512 |  |  |  | 6,197  |  |  |  | 29,709 | 
|Henry Hub natural gas         |  |                                   | 8,614  |         |  |       | 3,905  |         |  |         | 12,519 |       |  |  | 10,348 |  |  |  | 4,709  |  |  |  | 15,057 | 
|N.Y. heating oil              |  |                                   | 6,421  |         |  |       | 248    |         |  |         | 6,669  |       |  |  | 5,907  |  |  |  | 380    |  |  |  | 6,287  | 
|N.Y. harbor unleaded gasoline |  |                                   | 6,748  |         |  |       | 615    |         |  |         | 7,363  |       |  |  | 5,878  |  |  |  | 436    |  |  |  | 6,314  | 
|Other                         |  |                                   | 664    |         |  |       | 322    |         |  |         | 986    |       |  |  | 339    |  |  |  | 141    |  |  |  | 480    | 
|                              |  |                                   |        |         |  |       |        |         |  |         |        |       |  |  |        |  |  |  |        |  |  |  |        | 
|Total                         |  |                                   | 48,670 |         |  |       | 10,603 |         |  |         | 59,273 |       |  |  | 45,984 |  |  |  | 11,863 |  |  |  | 57,847 | 
|                              |  |                                   |        |         |  |       |        |         |  |         |        |       |  |  |        |  |  |  |        |  |  |  |        | 

NYMEX Division Contracts Open
Interest

(In thousands)


|                              |  |             |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |       |  |  |  |       | 
|----------------------------- |  | ----------- | ----- | ------- |  | ----- | ----- | ------- |  | ------- | ----- | ----- |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                              |  |            
|                              |  | At June 30,
|                              |  |            
|                              |  |             |       |        
|                              |  | 2004        |       | 2003   
|                              |  |             |       |        
|                              |  | Futures     |       | Options |  | Total |       | Futures |  | Options |       | Total
|                              |  |             |       |         |  |       |       |         |  |         |       |      
|Light sweet crude oil         |  |             | 698   |         |  |       | 1,005 |         |  |         | 1,703 |       |  |  | 504   |  |  |  | 658   |  |  |  | 1,162 | 
|Henry Hub natural gas         |  |             | 364   |         |  |       | 873   |         |  |         | 1,237 |       |  |  | 348   |  |  |  | 845   |  |  |  | 1,193 | 
|N.Y. heating oil              |  |             | 182   |         |  |       | 52    |         |  |         | 234   |       |  |  | 118   |  |  |  | 55    |  |  |  | 173   | 
|N.Y. harbor unleaded gasoline |  |             | 130   |         |  |       | 74    |         |  |         | 204   |       |  |  | 84    |  |  |  | 32    |  |  |  | 116   | 
|Other                         |  |             | 48    |         |  |       | 11    |         |  |         | 59    |       |  |  | 15    |  |  |  | 9     |  |  |  | 24    | 
|                              |  |             |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |       |  |  |  |       | 
|Total                         |  |             | 1,422 |         |  |       | 2,015 |         |  |         | 3,437 |       |  |  | 1,069 |  |  |  | 1,599 |  |  |  | 2,668 | 
|                              |  |             |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |       |  |  |  |       | 



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

For the three months ended June 30, 2004,
futures contract volume was 13.5 million contracts, an
increase of 3.0 million contracts or 28.6% from
10.5 million contracts for the same period last year.
Options contract volume was 2.9 million contracts, an
increase of 0.6 million contracts or 26.1% from
2.3 million contracts for the same period last year. Total
futures and options contract volume was 16.4 million
contracts, an increase of 3.6 million contracts or 28.1%
from 12.8 million contracts for the same period last year.

18



---



##### Table of Contents



For the six months ended June 30, 2004,
futures contract volume was 26.2 million contracts, an
increase of 2.7 million contracts or 11.5% from
23.5 million contracts for the same period last year.
Options contract volume was 5.5 million contracts, a
decrease of 0.7 million contracts or 11.3% from
6.2 million contracts for the same period last year. Total
futures and options contract volume was 31.7 million
contracts, an increase of 2.0 million contracts or 6.7%
from 29.7 million contracts for the same period last year.

Increases in contract volume for the three and
six months ended June 30, 2004 were due to a stronger
global demand for crude oil. Gasoline, a by-product of crude
oil, and its diminished supplies from the oil- producing
nations, has resulted in an increased demand for crude oil. In
addition, higher price differentials between crude oil and
gasoline resulted in higher trading activity. The decrease in
options contract volume was due to unusually strong levels of
volume in the first quarter of 2003, when volatility was higher
due to the war in Iraq.



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

For the three months ended June 30, 2004,
futures contract volume was 4.8 million contracts, an
increase of 0.2 million contracts or 4.3% from
4.6 million contracts for the same period last year.
Options contract volume was 1.9 million contracts, a
decrease of 0.2 million contracts or 9.5% from
2.1 million contracts for the same period last year. Total
futures and options contracts volume was 6.7 million
contracts, essentially flat when compared to the same period
last year.

The three months ended June 30, 2004 was
characterized by normal weather patterns and natural gas supply
levels. These factors contributed to the moderate increase in
futures contract volume and the moderate decrease in options
contract volume during the current year period.

For the six months ended June 30, 2004,
futures contract volume was 8.6 million contracts, a
decrease of 1.7 million contracts or 16.5% from
10.3 million contracts for the same period last year.
Options contract volume was 3.9 million contracts, a
decrease of 0.8 million contracts or 17.0% from
4.7 million contracts for the same period last year. Total
futures and options contracts volume was 12.5 million
contracts, a decrease of 2.6 million contracts or 17.2%
from 15.1 million contracts for the same period last year.

Decreases in futures and options contract volume
for the six months ended June 30, 2004 were due to
diminished concern regarding the supply of natural gas resulting
from a mild winter. During the prior year period, a colder than
expected winter led to increased concerns about the supply, and
therefore, resulted in increased trading activity.



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

For the three months ended June 30, 2004,
futures contract volume was 3.0 million contracts, an
increase of 0.6 million contracts or 25.0% from
2.4 million contracts for the same period last year.
Options contract volume was 0.1 million contracts for both
the current and prior year period. Total futures and options
contracts volume was 3.1 million contracts, an increase of
0.6 million contracts or 24.0% from 2.5 million
contracts for the same period last year.

For the six months ended June 30, 2004,
futures contract volume was 6.4 million contracts, an
increase of 0.5 million contracts or 8.5% from
5.9 million contracts for the same period last year.
Options contract volume was 0.2 million contracts, a
decrease of 0.2 million contracts or 50.0% from
0.4 million contracts for the same period last year. Total
futures and options contracts volume was 6.7 million
contracts, an increase of 0.4 million contracts or 6.3%
from 6.3 million contracts for the same period last year.

Increases in futures contract volume for the
three and six months ended June 30, 2004 were due to a
stronger global demand for petroleum products, including heating
oil. The decrease in options contract volume for the six months
ended June 30, 2004 was due to unusually strong levels of
volume in the prior year period, as volatility was higher due to
the war in Iraq.

19



---



##### Table of Contents





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

For the three months ended June 30, 2004,
futures contract volume was 3.6 million contracts, an
increase of 0.8 million contracts or 28.6% from
2.8 million contracts for the same period last year.
Options contract volume was 0.4 million, an increase of
0.2 million contracts or 100.0% from 0.2 million
contracts for the same period last year. Total futures and
options contracts volume was 4.0 million contracts, an
increase of 1.0 million contracts or 33.3% from
3.0 million contracts for the same period last year.

For the six months ended June 30, 2004,
futures contract volume was 6.7 million contracts, an
increase of 0.8 million contracts or 13.6% from
5.9 million contracts for the same period last year.
Options contract volume was 0.6 million, an increase of
0.2 million contracts or 50.0% from 0.4 million
contracts for the same period last year. Total futures and
options contract volume was 7.3 million contracts, an
increase of 1.0 million contracts or 15.9% from
6.3 million contracts for the same period last year.

Increases in futures and options contracts volume
for the three and six months ended June 30, 2004 were due
to a strong consumer demand for gasoline and stricter
Environmental Protection Agency standards required for the
production of cleaner gasoline. These factors reduced the supply
of gasoline, which in turn increased the price differential
between gasoline and crude oil, resulting in higher trading
activity.



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

For the three months ended June 30, 2004,
the volume of total futures and options contracts traded and
cleared for the COMEX Division was 7.7 million contracts,
an increase of 2.2 million contracts or 40.0% from
5.5 million contracts for the same period last year.
Futures contract volume was 6.0 million contracts, an
increase of 1.4 million contracts or 30.4% from
4.6 million contracts for the same period last year.
Options contract volume was 1.7 million contracts, an
increase of 0.7 million contracts or 70.0% from
1.0 million contracts for the same period last year.

For the six months ended June 30, 2004, the
volume of total futures and options contracts traded and cleared
for the COMEX Division was 15.9 million contracts, an
increase of 4.2 million contracts or 35.9% from
11.7 million contracts for the same period last year.
Futures contract volume was 13.3 million contracts, an
increase of 3.5 million contracts or 35.7% from
9.8 million contracts for the same period last year.
Options contract volume was 2.6 million contracts, an
increase of 0.6 million contracts or 30.0% from
2.0 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
metals futures and options products.

COMEX Division Contracts Traded and
Cleared

(In thousands)


|                     |  |                                     |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|-------------------- |  | ----------------------------------- | ----- | ------- |  | ----- | ----- | ------- |  | ------- | ----- | ----- |  |  | ----- |  |  |  | --- |  |  |  | ----- | 
|                     |  |                                    
|                     |  | For the Three Months Ended June 30,
|                     |  |                                    
|                     |  |                                     |       |        
|                     |  | 2004                                |       | 2003   
|                     |  |                                     |       |        
|Quarterly Comparison |  | Futures                             |       | Options |  | Total |       | Futures |  | Options |       | Total
|                     |  |                                     |       |         |  |       |       |         |  |         |       |      
|Gold                 |  |                                     | 3,665 |         |  |       | 1,309 |         |  |         | 4,974 |       |  |  | 2,752 |  |  |  | 864 |  |  |  | 3,616 | 
|Silver               |  |                                     | 1,441 |         |  |       | 286   |         |  |         | 1,727 |       |  |  | 942   |  |  |  | 87  |  |  |  | 1,029 | 
|High grade copper    |  |                                     | 895   |         |  |       | 77    |         |  |         | 972   |       |  |  | 847   |  |  |  | 9   |  |  |  | 856   | 
|Aluminum             |  |                                     | 23    |         |  |       |      |         |  |         | 23    |       |  |  | 38    |  |  |  | 2   |  |  |  | 40    | 
|                     |  |                                     |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |     |  |  |  |       | 
|Total                |  |                                     | 6,024 |         |  |       | 1,672 |         |  |         | 7,696 |       |  |  | 4,579 |  |  |  | 962 |  |  |  | 5,541 | 
|                     |  |                                     |       |         |  |       |       |         |  |         |       |       |  |  |       |  |  |  |     |  |  |  |       | 

20



---



##### Table of Contents



COMEX Division Contracts Traded and
Cleared

(In thousands)


|                        |  |                                   |        |         |  |       |       |         |  |         |        |       |  |  |       |  |  |  |       |  |  |  |        | 
|----------------------- |  | --------------------------------- | ------ | ------- |  | ----- | ----- | ------- |  | ------- | ------ | ----- |  |  | ----- |  |  |  | ----- |  |  |  | ------ | 
|                        |  |                                  
|                        |  | For the Six Months Ended June 30,
|                        |  |                                  
|                        |  |                                   |        |        
|                        |  | 2004                              |        | 2003   
|                        |  |                                   |        |        
|Year-to-Date Comparison |  | Futures                           |        | Options |  | Total |       | Futures |  | Options |        | Total
|                        |  |                                   |        |         |  |       |       |         |  |         |        |      
|Gold                    |  |                                   | 8,436  |         |  |       | 1,993 |         |  |         | 10,429 |       |  |  | 6,133 |  |  |  | 1,723 |  |  |  | 7,856  | 
|Silver                  |  |                                   | 2,946  |         |  |       | 480   |         |  |         | 3,426  |       |  |  | 1,903 |  |  |  | 219   |  |  |  | 2,122  | 
|High grade copper       |  |                                   | 1,868  |         |  |       | 129   |         |  |         | 1,997  |       |  |  | 1,628 |  |  |  | 16    |  |  |  | 1,644  | 
|Aluminum                |  |                                   | 57     |         |  |       |      |         |  |         | 57     |       |  |  | 86    |  |  |  | 2     |  |  |  | 88     | 
|                        |  |                                   |        |         |  |       |       |         |  |         |        |       |  |  |       |  |  |  |       |  |  |  |        | 
|Total                   |  |                                   | 13,307 |         |  |       | 2,602 |         |  |         | 15,909 |       |  |  | 9,750 |  |  |  | 1,960 |  |  |  | 11,710 | 
|                        |  |                                   |        |         |  |       |       |         |  |         |        |       |  |  |       |  |  |  |       |  |  |  |        | 

COMEX Division Contracts Open
Interest

(In thousands)


|                  |  |             |     |         |  |       |     |         |  |         |       |       |  |  |     |  |  |  |     |  |  |  |     | 
|----------------- |  | ----------- | --- | ------- |  | ----- | --- | ------- |  | ------- | ----- | ----- |  |  | --- |  |  |  | --- |  |  |  | --- | 
|                  |  |            
|                  |  | At June 30,
|                  |  |            
|                  |  |             |     |        
|                  |  | 2004        |     | 2003   
|                  |  |             |     |        
|                  |  | Futures     |     | Options |  | Total |     | Futures |  | Options |       | Total
|                  |  |             |     |         |  |       |     |         |  |         |       |      
|Gold              |  |             | 224 |         |  |       | 637 |         |  |         | 861   |       |  |  | 184 |  |  |  | 415 |  |  |  | 599 | 
|Silver            |  |             | 89  |         |  |       | 98  |         |  |         | 187   |       |  |  | 79  |  |  |  | 48  |  |  |  | 127 | 
|High grade copper |  |             | 57  |         |  |       | 26  |         |  |         | 83    |       |  |  | 75  |  |  |  | 3   |  |  |  | 78  | 
|Aluminum          |  |             | 10  |         |  |       |    |         |  |         | 10    |       |  |  | 8   |  |  |  | 1   |  |  |  | 9   | 
|                  |  |             |     |         |  |       |     |         |  |         |       |       |  |  |     |  |  |  |     |  |  |  |     | 
|Total             |  |             | 380 |         |  |       | 761 |         |  |         | 1,141 |       |  |  | 346 |  |  |  | 467 |  |  |  | 813 | 
|                  |  |             |     |         |  |       |     |         |  |         |       |       |  |  |     |  |  |  |     |  |  |  |     | 



| |     
| | ----
| | Gold

For the three months ended June 30, 2004,
futures contract volume was 3.7 million contracts, an
increase of 0.9 million contracts or 32.1% from
2.8 million contracts for the same period last year.
Options contract volume was 1.3 million contracts, an
increase of 0.4 million contracts or 44.4% from
0.9 million contracts for the same period last year. Total
futures and options contract volume was 5.0 million
contracts, an increase of 1.3 million contracts or 35.1%
from 3.7 million contracts for the same period last year.

For the six months ended June 30, 2004,
futures contract volume was 8.4 million contracts, an
increase of 2.3 million contracts or 37.7% from
6.1 million contracts for the same period last year.
Options contract volume was 2.0 million contracts, an
increase of 0.3 million contracts or 17.6% from
1.7 million contracts for the same period last year. Total
futures and options contract volume was 10.4 million
contracts, an increase of 2.6 million contracts or 33.3%
from 7.8 million contracts for the same period last year.

Increases in futures and options contract volume
for the three and six months ended June 30, 2004 were due
to significant uncertainty regarding geopolitical conditions,
rapidly rising physical commodity prices, a weakened
U.S. currency and economic growth, which led to increased
hedging and speculative demand for gold futures and options.



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

For the three months ended June 30, 2004,
futures contract volume was 1.4 million contracts, an
increase of 0.5 million contracts or 55.6% from
0.9 million contracts for the same period last year.
Options contract volume was 0.3 million contracts, an
increase of 0.2 million contracts from 0.1 million
contracts for the same period last year. Total futures and
options contract volume was 1.7 million contracts, an
increase of 0.7 million contracts or 70.0% from
1.0 million contracts for the same period last year.

For the six months ended June 30, 2004,
futures contract volume was 2.9 million contracts, an
increase of 1.0 million contracts or 52.6% from
1.9 million contracts for the same period last year.
Options contract

21



---



##### Table of Contents



volume was 0.5 million contracts, an
increase of 0.3 million contracts from 0.2 million
contracts for the same period last year. Total futures and
options contract volume was 3.4 million contracts, an
increase of 1.3 million contracts or 61.9% from
2.1 million contracts for the same period last year.


Increases in futures and options contract volume
for the three and six months ended June 30, 2004 were due
to significant uncertainty regarding geopolitical conditions,
rapidly rising physical commodity prices, a weakened
U.S. currency and economic growth, which led to increased
hedging and speculative demand for silver futures and options.



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

For the three months ended June 30, 2004,
futures contract volume remained essentially flat at
0.9 million contracts, and options contract volume
increased to 77,000 contracts from 9,000 contracts compared to
the same period last year. Total futures and options contract
volume was 1.0 million contracts, an increase of
0.1 million contracts or 11.1% from 0.9 million
contracts for the same period last year.

For the six months ended June 30, 2004,
futures contract volume was 1.9 million contracts, an
increase of 0.3 million contracts or 18.8% from
1.6 million contracts for the same period last year.
Options contract volume increased to 129,000 contracts from
16,000 contracts compared to the same period last year. Total
futures and options contract volume was 2.0 million
contracts, an increase of 0.4 million or 25.0% from
1.6 million contracts for the same period last year.

Increases in futures and options contract volume
for the six months ended June 30, 2004 were due to strong
housing starts in the U.S. coupled with increased
international demand and changes in supply patterns, which
contributed to increased market volatility, resulting in
increases in copper futures and options trading levels. In
addition, rapidly declining global warehouse stocks,
interruptions in the copper supply chain and world usage of
copper exceeding production also contributed to the higher
trading volumes.



| |                               
| | ------------------------------
| | NYMEX ClearPortSM
    Clearing

For the three months ended June 30, 2004,
futures and options contract clearing volume was
2.9 million contracts, an increase of 1.5 million
contracts or over 100.0% from 1.4 million contracts from
the same period last year.

For the six months ended June 30, 2004,
futures and options contract clearing volume was
4.8 million contracts, an increase of 1.9 million
contracts or 65.5% from 2.9 million contracts from the same
period last year.

While the Companys open outcry and
electronic trading venues experienced declines in natural gas
futures and options trading volumes for the six months ended
June 30, 2004, 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, significant growth in existing natural gas products
during the current period and the launch of new products for
petroleum and electricity on NYMEX ClearPortSM
Clearing contributed to this increase.

22



---



##### Table of Contents



NYMEX ClearPortSM Clearing
Contracts

(In thousands)


|                     |  |               |       |      |  |  |       | 
|-------------------- |  | ------------- | ----- | ---- |  |  | ----- | 
|                     |  |              
|                     |  | For the Three
|                     |  | Months Ended 
|                     |  | June 30,     
|                     |  |              
|Quarterly Comparison |  | 2004          |       | 2003
|                     |  |               |       |     
|Natural gas          |  |               | 2,572 |      |  |  | 1,346 | 
|Electricity          |  |               | 134   |      |  |  | 51    | 
|Petroleum products   |  |               | 146   |      |  |  | 3     | 
|Coal                 |  |               | 2     |      |  |  | 1     | 
|                     |  |               |       |      |  |  |       | 
|Total                |  |               | 2,854 |      |  |  | 1,401 | 
|                     |  |               |       |      |  |  |       | 

|                        |  |              |       |      |  |  |       | 
|----------------------- |  | ------------ | ----- | ---- |  |  | ----- | 
|                        |  |             
|                        |  | For the Six 
|                        |  | Months Ended
|                        |  | June 30,    
|                        |  |             
|Year-to-Date Comparison |  | 2004         |       | 2003
|                        |  |              |       |     
|Natural gas             |  |              | 4,336 |      |  |  | 2,796 | 
|Electricity             |  |              | 239   |      |  |  | 81    | 
|Petroleum products      |  |              | 258   |      |  |  | 4     | 
|Coal                    |  |              | 4     |      |  |  | 1     | 
|                        |  |              |       |      |  |  |       | 
|Total                   |  |              | 4,837 |      |  |  | 2,882 | 
|                        |  |              |       |      |  |  |       | 

NYMEX ClearPortSM Clearing Open
Interest

(In thousands)


|                   |  |             |       |      |  |  |     | 
|------------------ |  | ----------- | ----- | ---- |  |  | --- | 
|                   |  |            
|                   |  | At June 30,
|                   |  |            
|                   |  | 2004        |       | 2003
|                   |  |             |       |     
|Natural gas        |  |             | 1,525 |      |  |  | 800 | 
|Electricity        |  |             | 36    |      |  |  | 21  | 
|Petroleum products |  |             | 99    |      |  |  | 3   | 
|Coal               |  |             | 143   |      |  |  | 1   | 
|                   |  |             |       |      |  |  |     | 
|Total              |  |             | 1,803 |      |  |  | 825 | 
|                   |  |             |       |      |  |  |     | 

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. During the six months ended
June 30, 2004, the Company had no capitalized internal-use
software

23



---



##### Table of Contents



costs, compared to $1.2 million capitalized
in the comparable prior year period. 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 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, which totaled
$3.5 million and $8.1 million for the three and six
months ended June 30, 2003. This program was eliminated
effective December 31, 2003 and, as a result, there were no
fee reduction credits during the three and six months ended
June 30, 2004.

Clearing and transaction fees receivable are
monies due to the Company from clearing member firms. Exposure
to losses on receivables is principally dependent on the
financial condition of each clearing member firm. Clearing
members seats collateralize fees owed to the Company. At
June 30, 2004, no clearing and transaction fees receivable
balance was greater than the related clearing members
aggregate 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 $256,000 at June 30, 2004. The Company believes the
likelihood of incurring material losses due to
non-collectibility of clearing and transaction fees 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 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 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 June 30, 2004,
this allowance was $114,000, which the Company believes is
sufficient to cover potential bad debts and subsequent credits.
At June 30, 2004, the combined amounts due from ten
customers represented 83% 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 and non-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-collectible
receivables of $681,000 at June 30, 2004, and believes the
amount is sufficient to cover potential bad debts and subsequent
credits.

24



---



##### Table of Contents





| |                                                                   
| | ------------------------------------------------------------------
| | 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 acceleration of depreciation and
associated 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 the recapture
schedule.

Results of Operations for the Three and Six
Months Ended June 30, 2004 and 2003



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

Net income for the three months ended
June 30, 2004 was $5.3 million, an increase of
$5.1 million from $0.2 million for the same period
last year. This increase was the result of higher revenues of
$15.5 million, which was partially offset by higher
operating expenses of $2.9 million. The increase in net
revenues was due to an increase in gross revenues from higher
trading and clearing volumes, as well as the elimination of the
Companys proprietary fee reduction program. The increase
in operating expenses was due primarily to increased salaries
and employee benefits related to severance agreements with two
of the Companys senior executives. In addition,
professional fees increased due to consulting services for
various company initiatives and legal services retained for
on-going litigation.

Net income for the six months ended June 30,
2004 was $11.6 million, an increase of $5.7 million
from $5.9 million for the same period last year. This
increase was the result of higher net revenues of
$19.0 million, which was partially offset by higher
operating expenses of $7.1 million. The increase in net
revenues was due to an increase in gross revenues from higher
trading and clearing volumes, as well as the elimination of the
Companys proprietary fee reduction program. The increase
in operating expenses was due primarily to increased salaries
and employee benefits, professional fees and general and
administrative expenses. Salaries and employee benefits
increased due to severance agreements with two of the
Companys senior executives. Professional fees increased
due to consulting services for various company initiatives and
legal services retained for on-going litigation. General and
administrative expenses increased due to higher broker 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.

25



---



##### Table of Contents



The following table summarizes the components of
net income for the three and six months ended June 30, 2004
and 2003 (in thousands, except for share data):

|                                     |                                                    |                    |        |                  |  |      |        |      |   |   |         |        |  |   |        |        | 
|------------------------------------ | -------------------------------------------------- | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- | - | - | ------- | ------ |  | - | ------ | ------ | 
|                                     |                                                    |                    |        |                 
|                                     |                                                    | Three Months Ended |        | Six Months Ended
|                                     |                                                    | June 30,           |        | June 30,        
|                                     |                                                    |                    |        |                 
|                                     |                                                    | 2004               |        | 2003             |  | 2004 |        | 2003
|                                     |                                                    |                    |        |                  |  |      |        |     
|Total revenues                       |                                                    | $                  | 56,459 |                  |  | $    | 41,037 |      |   | $ | 109,696 |        |  | $ | 90,662 |       
|Operating expenses                   |                                                    |                    | 44,113 |                  |  |      | 41,204 |      |   |   | 85,808  |        |  |   | 78,665 |       
|                                     |                                                    |                    |        |                  |  |      |        |      |   |   |         |        |  |   |        |       
|                                     | Operating income (loss)                            |                    |        | 12,346           |  |      |        | (167 | ) |   |         | 23,888 |  |   |        | 11,997 | 
|Investment income (loss), net        |                                                    |                    | (884   | )                |  |      | 2,064  |      |   |   | 416     |        |  |   | 2,750  |       
|Interest expense                     |                                                    |                    | 1,770  |                  |  |      | 1,823  |      |   |   | 3,540   |        |  |   | 3,645  |       
|                                     |                                                    |                    |        |                  |  |      |        |      |   |   |         |        |  |   |        |       
|                                     | Income before provision (benefit) for income taxes |                    |        | 9,692            |  |      |        | 74   |   |   |         | 20,764 |  |   |        | 11,102 | 
|Provision (benefit) for income taxes |                                                    |                    | 4,370  |                  |  |      | (103   | )    |   |   | 9,200   |        |  |   | 5,170  |       
|                                     |                                                    |                    |        |                  |  |      |        |      |   |   |         |        |  |   |        |       
|                                     | Net income                                         |                    | $      | 5,322            |  |      | $      | 177  |   |   | $       | 11,564 |  |   | $      | 5,932  | 
|                                     |                                                    |                    |        |                  |  |      |        |      |   |   |         |        |  |   |        |       
|Basic and diluted earnings per share |                                                    | $                  | 6,522  |                  |  | $    | 217    |      |   | $ | 14,172  |        |  | $ | 7,270  |       
|                                     |                                                    |                    |        |                  |  |      |        |      |   |   |         |        |  |   |        |       

Revenue



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

For the three months ended June 30, 2004,
clearing and transaction fees were $45.7 million, an
increase of $16.3 million or 55.4% from $29.4 million
for the same period last year. For the six months ended
June 30, 2004, clearing and transaction fees were
$88.6 million, an increase of $19.8 million or 28.8%
from $68.8 million for the same period last year. The
increases for both the three- and six-month periods were due to
higher NYMEX Division and COMEX Division floor trading volumes,
NYMEX ClearPortSM Clearing volumes and average
revenue per contract cleared. In addition, the elimination of
the proprietary fee reduction program also contributed to the
increase in revenue.

For the three and six months ended June 30,
2004, gross revenue per contract was $1.11, an increase of $0.09
and $0.05 per contract compared to the comparable prior
year periods. Gross revenue per contract increased due to the
customer trading mix and an increase in the trading of certain
products on NYMEX ClearPortSM. For the three and six
months ended June 30, 2004, net revenue per contract
increased an additional $0.11 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):

|                                                              |                                    |                    |   |                  |  |      |   |        |   |  |   |        |  |  |   |        |  
|------------------------------------------------------------- | ---------------------------------- | ------------------ | - | ---------------- |  | ---- | - | ------ | - |  | - | ------ |  |  | - | ------ | -
|                                                              |                                    |                    |   |                 
|                                                              |                                    | Three Months Ended |   | Six Months Ended
|                                                              |                                    | June 30,           |   | June 30,        
|                                                              |                                    |                    |   |                 
|                                                              |                                    | 2004               |   | 2003             |  | 2004 |   | 2003  
|                                                              |                                    |                    |   |                  |  |      |   |       
|Clearing and Transaction Fee Revenue                          |                                    |                    |   |                  |  |      |   |        |   |  |   |        |  |  |   |       
|                                                              | Gross fees                         |                    | $ | 45,734           |  |      | $ | 32,852 |   |  | $ | 88,615 |  |  | $ | 76,900 |  
|                                                              | Propriety fee reduction program    |                    |   |                 |  |      |   | (3,487 | ) |  |   |       |  |  |   | (8,145 | )
|                                                              |                                    |                    |   |                  |  |      |   |        |   |  |   |        |  |  |   |       
|                                                              | Clearing and transaction fees, net |                    | $ | 45,734           |  |      | $ | 29,365 |   |  | $ | 88,615 |  |  | $ | 68,755 |  
|                                                              |                                    |                    |   |                  |  |      |   |        |   |  |   |        |  |  |   |       
|Average Clearing and Transaction Fee Revenue
    per Contract |                                    |                    |   |                  |  |      |   |        |   |  |   |        |  |  |   |       
|                                                              | Gross revenue per contract         |                    | $ | 1.11             |  |      | $ | 1.02   |   |  | $ | 1.11   |  |  | $ | 1.06   |  
|                                                              | Impact of fee reduction program    |                    |   |                 |  |      |   | (0.11  | ) |  |   |       |  |  |   | (0.11  | )
|                                                              |                                    |                    |   |                  |  |      |   |        |   |  |   |        |  |  |   |       
|                                                              | Revenue per contract, net          |                    | $ | 1.11             |  |      | $ | 0.91   |   |  | $ | 1.11   |  |  | $ | 0.95   |  
|                                                              |                                    |                    |   |                  |  |      |   |        |   |  |   |        |  |  |   |       

26



---



##### Table of Contents





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

For the three months ended June 30, 2004,
market data fee revenues were $8.0 million, an increase of
$0.1 million or 1.3% from $7.9 million for the same
period last year. This increase was due primarily to vendor
administrative fees that began being billed for both the NYMEX
Division and COMEX Divisions in May of 2004.

For the six months ended June 30, 2004,
market data fee revenues were $15.7 million, a decrease of
$0.6 million or 3.7% from $16.3 million for the same
period last year. This decrease was due primarily to a decline
in the number of subscriber units. In addition, this decrease
was the result of audit recovery revenue included in the prior
year period.



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

For the three months ended June 30, 2004,
other revenues were $2.7 million, a decrease of
$1.0 million or 27.0% from $3.7 million for the same
period last year. For the six months ended June 30, 2004,
other revenues were $5.4 million, a decrease of
$0.2 million or 3.6% from $5.6 million for the same
period last year. The decreases for both the three- and
six-month periods were due primarily to rental revenue
adjustments in the prior year periods.



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



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

For the three months ended June 30, 2004,
salaries and employee benefit expenses were $15.4 million,
an increase of $2.2 million or 16.7% from
$13.2 million for the same period last year. For the six
months ended June 30, 2004, salaries and employee benefit
expenses were $29.0 million, an increase of
$2.4 million or 9.0% from $26.6 million for the same
period last year. The increases for both the three- and
six-month periods were due primarily to an increase in severance
costs the Company incurred with respect to two of its senior
executives, as well as lower levels of capitalized compensation
related to software development activities. This increase was
partially offset by lower employee costs attributable to a
decline in the average number of employees as compared to the
same period last year.



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

For the three months ended June 30, 2004,
occupancy and equipment expenses were $6.2 million, a
decrease of $0.7 million or 10.1% from $6.9 million
for the same period last year. For the six months ended
June 30, 2004, occupancy and equipment expenses were
$12.2 million, a decrease of $1.7 million or 12.2%
from $13.9 million for the same period last year. The
decreases for both the three- and six-month periods were due
primarily to the additional rent and associated expenses the
Company incurred in the prior year periods to maintain a
temporary disaster recovery site.



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

For the three months ended June 30, 2004,
depreciation and amortization expenses were $5.3 million,
an increase of $0.6 million or 12.8% from $4.7 million
for the same period last year. For the six months ended
June 30, 2004, depreciation and amortization expenses were
$10.5 million, an increase of $1.0 million or 10.5%
from $9.5 million for the same period last year. The
increases for both the three- and six-month periods were 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

27



---



##### Table of Contents



technology infrastructure. The change in useful
lives will result in higher annual depreciation costs in 2004
compared to 2003.




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

For the three months ended June 30, 2004,
general and administrative expenses were $6.6 million, an
increase of $0.3 million or 4.8% from $6.3 million for
the same period last year. For the six months ended
June 30, 2004, general and administrative expenses were
$13.1 million, an increase of $3.2 million or 32.3%
from $9.9 million for the same period last year. The
increases for both the three- and six-month periods were
attributable to the Companys implementation of, in the
second quarter of 2003, certain programs designed to provide
incentives to third parties to establish business with the
Company. This increase was partially offset by a decrease in
litigation settlements in the current year periods. In addition,
insurance expenses during the current six month period increased
due to premiums on a default insurance policy obtained in 2003
to provide protection to the Companys clearinghouse in the
event of a clearing member default that exceeds the Guaranty
Fund.



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

For the three months ended June 30, 2004,
professional service expenses were $6.7 million, an
increase of $1.2 million or 21.8% from $5.5 million
for the same period last year. For the six months ended
June 30, 2004, professional service expenses were
$12.4 million, an increase of $2.9 million or 30.5%
from $9.5 million for the same period last year. The
increases for both the three-and six-month periods were due
primarily to higher consulting fees related to compliance with
the Sarbanes-Oxley Act of 2002, as well as financial and
technical consulting to support technology initiatives. In
addition, legal fees during the current six-month period
increased due to on-going involvement in certain litigation.



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

For the three months ended June 30, 2004,
telecommunications expenses were $1.5 million, an increase
of $0.2 million or 15.4% from $1.3 million for the
same period last year. For the six months ended June 30,
2004, telecommunications expenses were $2.9 million, an
increase of $0.2 million or 7.4% from $2.7 million for
the same period last year. The increases for both the three- and
six-month periods were due to higher data and voice
communication expenses related to the permanent business
recovery site the Company began occupying during the second
quarter of 2003.



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

For the three months ended June 30, 2004,
marketing expenses were $0.5 million, a decrease of
$0.3 million or 37.5% from $0.8 million for the same
period last year. This decrease was due primarily to fewer
Exchange-sponsored events and advertising campaigns during the
current year period.

For the six months ended June 30, 2004,
marketing expenses were $1.2 million, a decrease of
$0.1 million or 7.7% from $1.3 million for the same
period last year. This decrease was due primarily to fewer
advertising campaigns offset, in part, by additional corporate
logo sponsorships during the current year period.



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

For the three months ended June 30, 2004,
other expenses were $1.5 million, a decrease of
$0.9 million or 37.5% from $2.4 million for the same
period last year. For the six months ended June 30, 2004,
other expenses were $3.8 million, a decrease of
$0.6 million or 13.6% from $4.4 million for the same
period last year. The decreases for both the three- and
six-month periods were due primarily to lower earnings from the
COMEX Members Recognition and Retention Program
(MRRP) offset, in part, by higher charitable
contributions during the current year periods. The earnings or
loss for the COMEX MRRP are included in investment income, with
an equal and offsetting charge recorded in other expenses on the
consolidated statements of income.

28



---



##### Table of Contents





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

The loss on impairment and disposition of
capitalized software and computer equipment for the three and
six month periods ended June 30, 2004 was $0.4 million
and $0.5 million, respectively. Future implementation of a
new technology infrastructure will render certain existing
technology assets obsolete and, therefore, the Company
anticipates that additional charges for disposal of assets will
be recognized in 2004.



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

For the three months ended June 30, 2004,
investments yielded a loss of $0.9 million, a decrease of
$3.0 million from income of $2.1 million for the same
period last year. For the six months ended June 30, 2004,
investment income was $0.4 million, a decrease of
$2.4 million from $2.8 million for the same period
last year. The decreases for both the three- and six-month
periods were due primarily to higher unrealized losses on fixed
income securities.



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

The Companys effective tax rate was 44.3%
for the six months ended June 30, 2004, compared to 46.6%
for the same period last year. The difference between the
effective tax rates was due primarily to the recognition of
valuation allowances related to the potential expiration of
charitable contribution carry-forwards and disallowed research
and development credits during the prior year periods.



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



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

At June 30, 2004, the Company had
$134.1 million in cash and cash equivalents, securities
purchased under agreements to resell and marketable securities.
Working capital at June 30, 2004 was $117.4 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 six months ended June 30, 2004
and 2003 (in thousands):

|                                                           |                                         |                    |         |       |   |   |        |       |  
|---------------------------------------------------------- | --------------------------------------- | ------------------ | ------- | ----- | - | - | ------ | ----- | -
|                                                           |                                         |                   
|                                                           |                                         | For the Six Months
|                                                           |                                         | Ended June 30,    
|                                                           |                                         |                   
|                                                           |                                         | 2004               |         | 2003 
|                                                           |                                         |                    |         |      
|Net cash provided by operating activities                  |                                         | $                  | 27,500  |       |   | $ | 19,939 |      
|Increase in marketable securities                          |                                         |                    | (55,238 | )     |   |   | (1,140 | )    
|Decrease (increase) in securities purchased for
    resale |                                         |                    | 32,406  |       |   |   | (3,923 | )    
|Capital expenditures                                       |                                         |                    | (3,451  | )     |   |   | (6,301 | )    
|Other net cash flows                                       |                                         |                    | 892     |       |   |   | (3,821 | )    
|                                                           |                                         |                    |         |       |   |   |        |      
|                                                           | Net change in cash and investments      |                    |         | 2,109 |   |   |        | 4,754 |  
|Dividends paid to stockholders                             |                                         |                    | (2,500  | )     |   |   | (5,000 | )    
|                                                           |                                         |                    |         |       |   |   |        |      
|                                                           | Net change in cash and cash equivalents |                    | $       | (391  | ) |   | $      | (246  | )
|                                                           |                                         |                    |         |       |   |   |        |      

29



---



##### Table of Contents



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 was
$27.5 million for the six months ended June 30, 2004
compared to $19.9 million for the same period last year.
Cash flows from operating activities resulted primarily from net
income during both periods, which represents the Companys
principal source of cash and led the period-over-period
increase. In addition, operating cash flows were positively
impacted by increases in trade payables, accrued expenses and
deferred tax assets, offset by increases in accounts receivable
related to an increase in revenues period-over-period and income
tax payments of $12.3 million during the current year
period compared to $4.7 million in the prior year period.
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 was
$25.4 million for the six months ended June 30, 2004,
an increase of $10.2 million compared to $15.2 million
for the same period last year. This increase was due primarily
to the investment of higher operating cash flows.

Capital expenditures for the six months ended
June 30, 2004 and 2003 were $3.5 million and
$6.3 million, respectively.

Net cash used in financing activities for the six
months ended June 30, 2004 and 2003 was $2.5 million
and $5.0 million, respectively. These amounts represent
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
the Board of Trade of the City of New York, Inc.
(NYBOT) entered into a ten-year lease agreement,
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 agreement.

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. During the second quarter of 2004,
the Company reduced the amount of cash invested in overnight
repurchase agreements and increased the amount invested in
marketable securities. The Company believes this change will
increase its overall investment yield while maintaining a
reasonable amount of cash on hand to meet daily working capital
needs. At June 30, 2004 and December 31, 2003, cash
and investments were as follows (in thousands):

|                                                |  |          |         |              |  |   |         | 
|----------------------------------------------- |  | -------- | ------- | ------------ |  | - | ------- | 
|                                                |  | June 30, |         | December 31,
|                                                |  | 2004     |         | 2003        
|                                                |  |          |         |             
|Cash and cash equivalents                       |  | $        | 1,372   |              |  | $ | 1,763   | 
|Securities purchased under agreements to resell |  |          | 12,644  |              |  |   | 45,050  | 
|Marketable securities                           |  |          | 120,123 |              |  |   | 64,885  | 
|                                                |  |          |         |              |  |   |         | 
|                                                |  | $        | 134,139 |              |  | $ | 111,698 | 
|                                                |  |          |         |              |  |   |         | 

30



---



##### Table of Contents



Included in marketable securities at
June 30, 2004 are investments totaling $11.7 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 the 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 the 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 membership
seats. 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 $8.5 million
and $10.1 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. The amount of margin deposits on
hand will fluctuate over time as a result of, among other
things, the extent of open positions held at any one point in
time by market participants in NYMEX Division and COMEX Division
contracts and the margin rates then in effect for such contracts.

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

31



---



##### Table of Contents



temporary liquidity, prior to accessing Guaranty
Funds, in the event of a clearing member default, and would be
collateralized by margin deposits and Guaranty Funds. The
Company expects to put the facility in place during the second
half of 2004.


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 table in
note 8, Margin Deposits and Guaranty Funds,sets
forth Guaranty Fund balances held by the Company on behalf of
clearing members at June 30, 2004 and December 31,
2003.



| |                         
| | ------------------------
| | 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 June 30, 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     |   |        
|                        |                             | 1 Year                        |   | 1-3 Years |        | 4-5 Years |   | 5 Years |        | Total
|                        |                             |                               |   |           |        |           |   |         |        |      
|Contractual Obligations |                             |                               |   |           |        |           |   |         |        |       |   |        |        |  |   |        |         |  |   |       
|                        | Long-term debt principal    |                               | $ | 2,817     |        |           | $ | 5,634   |        |       | $ | 5,634  |        |  | $ | 77,464 |         |  | $ | 91,549 |        
|                        | Debt interest               |                               |   | 6,942     |        |           |   | 13,252  |        |       |   | 12,409 |        |  |   | 50,568 |         |  |   | 83,171 |        
|                        | Operating leases            |                               |   | 4,192     |        |           |   | 7,195   |        |       |   | 6,573  |        |  |   | 10,055 |         |  |   | 28,015 |        
|                        | Other long-term obligations |                               |   | 800       |        |           |   | 1,600   |        |       |   | 1,600  |        |  |   | 8,251  |         |  |   | 12,251 |        
|                        |                             |                               |   |           |        |           |   |         |        |       |   |        |        |  |   |        |         |  |   |       
|                        |                             | Total contractual obligations |   | $         | 14,751 |           |   | $       | 27,681 |       |   | $      | 26,216 |  |   | $      | 146,338 |  |   | $      | 214,986 | 
|                        |                             |                               |   |           |        |           |   |         |        |       |   |        |        |  |   |        |         |  |   |       

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, in connection with a
Company proposal to clear OTC options, 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 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 solely 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 June 30, 2004,
and interest earned is paid monthly to each respective lessee.

32



---



##### Table of Contents



Business Highlights

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. Parthenon and the Company engaged in due
diligence and had preliminary discussions as to the structure of
a proposed deal. Based on these discussions, the board of
directors of the Company determined on August 4, 2004 not
to currently pursue a transaction with Parthenon.

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 the offering of an electronic market in
options on oil and gas inventory statistics that will be offered
through an auction process and cleared by the Exchange. The
first natural gas inventory auction took place on June 2,
2004, prior to the June 3, 2004 release of the gas storage
number by the Energy Information Administration of the
Department of Energy.

In May 2004, the Company and the Tokyo Commodity
Exchange (TOCOM) executed a cooperation agreement
through which, among other things, TOCOM would assist the
Company in the offering of the Companys products in Japan.
On July 13, 2004, the Company and TOCOM announced that
energy and metals futures contracts will become available for
trading in Japan on NYMEX ACCESS®, beginning July 20,
2004.

On May 21, 2004, the Company announced that
it received regulatory approval from the Monetary Authority of
Singapore to offer trading in crude oil, petroleum products, and
gold futures on its internet-based electronic trading platforms
in Singapore. Approval was granted for trading light, sweet
crude oil, Brent crude oil, heating oil, gasoline, and gold
futures, as well as futures contracts on four U.S. crude
oil price differentials on NYMEX ACCESS®, and a slate of
crude oil and refined product outright and differential swap
futures contracts on NYMEX ClearPortSM.

On June 3, 2004, the Company announced that,
by mutual agreement, the contract of J. Robert
Collins, Jr., as president, would not be renewed. Under the
terms of his contract, Mr. Collins employment terminated on
June 30, 2004. Mr. Collins had been president of the
Exchange since July 2001.



| |                  
| | -----------------
| | Subsequent Events

On July 7, 2004, the board of directors of
the Company voted to declare and distribute a dividend of
$2.5 million to stockholders of record as of July 15,
2004. The dividend is the fourth issued by the Company since its
demutualization in November 2000.

The Company and its president, J. Robert
Collins, Jr., mutually agreed to not renew
Mr. Collins employment agreement, which expired on
June 30, 2004. The Company recorded a $2.2 million
charge in June 2004 for amounts due Mr. Collins under the
non-renewal provisions of his employment agreement. On
July 9, 2004, the Company announced that Dr. James E.
Newsome accepted the position of president of the Company,
effective August 2, 2004. Dr. Newsome had been
Chairman of the Commodity Futures Trading Commission
(CFTC) since Senate confirmation in December 2001.
He served as a Commissioner of the CFTC since August 1998.

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. Parthenon and the Company engaged in
due diligence and had preliminary discussions as to the
structure of a proposed deal. Based on these discussions, the
board of directors of the Company determined on August 4,
2004 not to currently pursue a transaction with Parthenon.

33



---



##### Table of Contents



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.

34



---



##### 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 June 30, 2004


|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|------------------- |  | --------- | ------ | -------- |  | ----- | ------ | ------------- |  | - | ------- |  |  |  | ----- | 
|                    |  |           |        |          |  |       |        | Weighted     
|                    |  |           |        |          |  |       |        | Average      
|Year                |  | Principal |        | Interest |  | Total |        | Interest Rate
|                    |  |           |        |          |  |       |        |              
|Assets              |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Municipal Bonds     |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|2004                |  | $         |       |          |  | $     |       |               |  | $ |        |  |  |  | N/A   | 
|2005                |  |           | 54     |          |  |       | 2      |               |  | $ | 56      |  |  |  | 3.47% | 
|2006                |  |           | 1,134  |          |  |       | 57     |               |  | $ | 1,191   |  |  |  | 4.95% | 
|2007                |  |           | 4,866  |          |  |       | 248    |               |  | $ | 5,114   |  |  |  | 4.91% | 
|2008                |  |           | 12,739 |          |  |       | 565    |               |  | $ | 13,304  |  |  |  | 4.47% | 
|2009 and thereafter |  |           | 33,529 |          |  |       | 1,480  |               |  | $ | 35,009  |  |  |  | 4.13% | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Total               |  | $         | 52,322 |          |  | $     | 2,352  |               |  | $ | 54,674  |  |  |  |       | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Fair Value          |  | $         | 53,870 |          |  |       |        |               |  |   |         |  |  |  |       | 
|                    |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Liabilities         |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|Corporate Debt      |  |           |        |          |  |       |        |               |  |   |         |  |  |  |       | 
|2004                |  | $         | 2,817  |          |  | $     | 3,524  |               |  | $ | 6,341   |  |  |  | 7.71% | 
|2005                |  |           | 2,817  |          |  |       | 6,837  |               |  |   | 9,654   |  |  |  | 7.71% | 
|2006                |  |           | 2,817  |          |  |       | 6,626  |               |  |   | 9,443   |  |  |  | 7.72% | 
|2007                |  |           | 2,817  |          |  |       | 6,416  |               |  |   | 9,233   |  |  |  | 7.73% | 
|2008                |  |           | 2,817  |          |  |       | 6,204  |               |  |   | 9,021   |  |  |  | 7.74% | 
|2009 and thereafter |  |           | 77,464 |          |  |       | 53,564 |               |  |   | 131,028 |  |  |  | 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 United States government
and its agencies. The Company also invests in equity securities.
The Companys investment income consists primarily of
interest income and realized and unrealized gains and losses on
the market values of its investments. Given the composition of
its investment portfolio, the Companys investment income
is highly sensitive to fluctuation in interest rates.
Investments yielded a loss of $0.9 million and income of
$0.4 million for the three and six months ended
June 30, 2004, respectively, compared to income of
$2.1 million and $2.8 million for the same periods
last year. The fair value of the Companys marketable
securities, including equity securities, was $120.1 million
at June 30, 2004. Based on portfolio compositions at
June 30, 2004, assuming a 10% change in market values, the
Company would have recognized additional losses of
$12.0 million.

35



---



##### Table of Contents





| |     
| | ----
| | 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 bylaws authorize 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 than the seat value,
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 principal executive officer and
principal financial officer, after evaluating the effectiveness
of the Companys disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the
Exchange Act)) 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

36



---



##### Table of Contents



are effective in reporting, on a timely basis,
information required to be disclosed by the Company in the
reports that the Company files or submits under the Exchange
Act, and this Quarterly Report on Form 10-Q.


(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

Set forth below is a description of material
litigation to which the Company is a party, as of June 30,
2004. Although there can be no assurance as to the ultimate
outcome, the Company believes it has meritorious defenses and is
vigorously defending each matter described below. The final
outcome of any litigation, however, cannot be predicted with
certainty, and an adverse resolution of these matters could 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, Inc. v.
    IntercontinentalExchange, Inc.On
    November 20, 2002, NYMEX Exchange commenced an action in
    United States District Court for the Southern District of New
    York against IntercontinentalExchange, Inc. (ICE).
    The amended complaint alleges claims for (a) copyright
    infringement by ICE arising out of ICEs uses of certain
    NYMEX Exchange settlement prices; (b) service mark
    infringement by reason of use by ICE of the service marks NYMEX
    and NEW YORK MERCANTILE EXCHANGE, (c) violation of
    trademark anti-dilution statutes, and (d) interference with
    contractual relationships. On January 6, 2003, ICE served
    an Answer and Counterclaims, in which ICE alleges five
    counterclaims against NYMEX Exchange as follows: (1) a
    claim for purported violation of Section 2 of the Sherman
    Act, 15 U.S.C. § 2, for NYMEX Exchanges
    allegedly trying to maintain a monopoly in the execution of the
    North America energy futures and expand the alleged monopoly
    into the execution and clearing of North American OTC energy
    contracts by attempting to deny ICE access to NYMEX Exchange
    settlement prices; (2) a claim for purported violation of
    Section 1 of the Sherman Act by conspiring with certain of
    its members to restrain trade by attempting to deny ICE access
    to NYMEX Exchange settlement prices; (3) a claim for
    alleged violation of Section 2 of the Sherman Act by NYMEX
    Exchange purportedly denying ICE access to NYMEX Exchanges
    settlement prices which are allegedly an essential
    facility; (4) a claim for purported violation of
    Section 1 of the Sherman Act and Section 3 of the
    Clayton Act by NYMEX Exchange allegedly tying execution services
    for North American energy futures and options to clearing
    services; and (5) a claim for purported violation of the
    Lanham Act through false advertising with respect to certain
    services offered by NYMEX Exchange and services offered by ICE.
    The counterclaims request damages and trebled damages in amounts
    not specified yet by ICE in addition to injunctive and
    declaratory relief. NYMEX Exchanges response to the
    counterclaims was served on February 26, 2003.
|
| | On August 11, 2003, the Court issued an
    opinion dismissing certain counterclaims and one affirmative
    defense, with leave to replead. On about August 28, 2003,
    NYMEX Exchange was served with ICEs First Amended
    Counterclaims in which ICE made four counterclaims against NYMEX
    Exchange principally alleging violations of U.S. antitrust
    laws, including claims regarding monopoly leveraging.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | By Order and Opinion dated June 30, 2004,
    the Court granted NYMEX Exchanges motion and dismissed all
    of the antitrust counterclaims asserted against NYMEX Exchange.
    This case is ongoing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

The Company is defending counterclaims filed
against it by the defendant in the following legal action:



| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | New York Mercantile Exchange, Inc. v. Kai
    Neumann and Codeland, Inc.On
    May 18, 2004, NYMEX Exchange commenced an action in New
    York State Supreme Court. This action arises from
    defendants alleged unauthorized use of computer software
    and other subject matter proprietary to NYMEX

37



---



##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exchange, and asserts causes of action for, among
    other things, trade secret misappropriation, fraudulent
    misrepresentation, and breach of fiduciary duties. On
    June 25, 2004, defendants Neumann and Codeland answered the
    complaint and interposed several counterclaims against NYMEX
    Exchange that include causes of action for breach of contract
    and theft of trade secrets. These counterclaims seek, among
    other things, $13,000,000 in compensatory damages, $10,000,000
    in punitive damages, as well as injunctive relief and additional
    damages for back pay, front pay, lost fringe benefits, and
    reinstatement of Neumanns employment. NYMEX
    Exchanges time to reply, move or otherwise respond to
    these Counterclaims is currently September 3, 2004.






|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|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

Not applicable






|        |                  
|------- | -----------------
|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 Sean Keating.
|31.1 |  | Certification of the Principal Executive Officer
    pursuant to § 302 of the Sarbanes-Oxley Act of 2002.  
|31.2 |  | Certification of the Principal Financial Officer
    pursuant to § 302 of the Sarbanes-Oxley Act of 2002.  
|32.1 |  | Certification of the Principal Executive Officer
    pursuant to § 906 of the Sarbanes-Oxley Act of 2002.  
|32.2 |  | Certification of the Principal Financial Officer
    pursuant to § 906 of the Sarbanes-Oxley Act of 2002.  

(b) Reports on Form 8-K:

Not applicable

38



---



##### Table of Contents






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: August 6, 2004



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

Dated: August 6, 2004

39