Lightning is not supposed to strike twice, but don’t tell that to the folks at General Atlantic. While Wall Street was stunned Friday by the record-setting rise in the price of New York Mercantile Exchange shares, the management of General Atlantic must have been breaking out the Veuve Clicquot. Once again, the private equity firm had placed early bets on the future of electronic trading, and once again it racked up huge gains.

Also celebrating should be those working for the renaissance of downtown Manhattan. Notwithstanding years of postponements and disgraceful political wrangling, the exuberant reception given newly public NYMEX affirms that the business of Wall Street, if not the politics of redevelopment, is healthier than ever.

For those who missed it, the once-stodgy commodities exchange NYMEX, whose ticker symbol is NMX, went public on Friday at $59 a share. The stock broke first-day trading records as it soared to $150 before closing at $133, up 125% from the offering price.

In March, General Atlantic paid $160 million for a 10% stake in NYMEX; a further $10 million payment rounds up the cost of its investment to $170 million. Based on the close, that investment is now worth more than $1 billion. Not bad for eight months’ work.

Also in March, General Atlantic saw its $125 million stake in electronic trading company Archipelago soar as ARCA merged with the New York Stock Exchange. As of the end of June, the General Atlantic position was worth nearly $600 million.

Has exchange euphoria replaced dotcom delirium? Even some of the bankers on the deal, who did not wish to be quoted, affirm that Friday’s run-up in NYMEX’s share price was overdone. The issue was priced in line with other exchanges, such as InterContinental Exchange (ICE $101), at roughly 29 times estimated 2007 earnings of $2. The view is that the stock should not trade at a premium to the Chicago Mercantile Exchange (CME $535), which is more diversified, and which is selling at about 36 times projected 2007 earnings.

Only if the numbers for the NYMEX turn out to be much better than expected will the run-up prove sustainable, and that does not appear likely. The NYMEX just began shifting electronic trading over to the CME (NYMEX’s own platform was not up to par). As it will have to pay a toll charge on these trades, presumably the profitability will come under pressure. Also, the shift may take business off the floor, thus cannibalizing its traditional and more profitable activity. This is evidently already taking place. One observer described the drop-off in floor volume as “material,” and said the fourth quarter might be weak.

More important, the price of oil is down. No doubt there is a positive correlation between oil prices and trading activity. A prolonged slump in energy prices could dampen NYMEX stock pretty quickly.

However, even if NYMEX shares drift lower in coming months, that may be only temporary. There is considerable optimism about the sector. ICE shares are up 189% in the past 52 weeks, while the New York Stock Exchange (NYX $95), the Chicago Mercantile Exchange, and the Chicago Board of Trade (BOT $158) are all up more than 40% in a market that’s ahead less than 11%. Only NASDAQ (NDAQ $37) is off for the year, but it had risen more than 300% in 2005. The CME came public at the end of 2002 at $35, and now trades at $535. What’s it all about?

For starters, the exchanges are undergoing a major shift in technology. More and more trading is being done electronically, bypassing the traditional specialists on the NYSE and the wild-looking “outcry” traders in the commodities pits. Instead, computers are matching share and contract orders and executing trades at lightning speed.

The increased use of computer-driven trading has great appeal to the other new element in the mix — the hedge funds. Not only does the increased transaction speed enhance their ability to maneuver, it also allows the firms to operate more cheaply and with greater secrecy. As the number of hedge funds and their assets under management have proliferated (now estimated at something like 9,000 companies managing $1.8 trillion), they have had to scramble for new trading ideas. The quest has taken them into every sort of commodity and security niche, greatly expanding the activity on exchanges like the NYMEX. The amount of money being managed in energy hedge funds alone is estimated at $74 billion.

Traditionally, the NYMEX has been known as the leading forum for trading energy and precious metals futures. As such, it has especially catered to industrial clients that use futures and options to hedge their energy or feedstock costs. Whether it is Southwest Airlines hedging against a big run-up in jet fuel or Con Ed trying to lock in natural gas costs, the NYMEX has been the place to go.

In the past five years, however, hedge funds and other traders such as the investment banks have become significant participants. They have taken advantage of, and possibly exacerbated, swings in energy prices. Though studies have shown that such traders have accounted for less than 10% of total activity, undoubtedly their presence has grown. With it has come pressure to modernize the exchange.

As with the NYSE, the established NYMEX seat holders opposed the shift to electronic trading, because they benefited from their preferred trading rights on the floors of both exchanges. However, in both cases the former owners were effectively bought off by the hefty profits available from the public sale of stock in the two companies.

New entrants have pushed the established exchanges grumpily toward electronic trading. ICE, the leading energy futures outfit in Europe, went public about a year ago and also quickly doubled in price (though not as quickly). It is primarily an electronic platform, and is now being sued by NYMEX because it is trading some of the latter’s premier oil products.

Indeed, the other competitive driver is that the trading of shares and of commodities is increasingly international. Seven of the top 10 futures exchanges worldwide are outside America. The major exchanges are not only scrambling to ensure their technological capabilities, but also to lock in their international reach. Hence the investment NASDAQ has made in the London Stock Exchange and the NYSE bid for Euronext.

All this maneuvering makes for great opportunities for private equity players like General Atlantic, which has proved itself savvy about financial services. Investors might be encouraged to visit the firm’s Web site, which shows the other investments the company has made in the industry, such as Net 1 UEPS Technology (UEPS $25) and Australia’s Computershare (CPU. AX $8.48). If lightning can hit twice, how about three or four times? Why not go along for the ride?

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