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== Investigation ==
== Investigation ==
In 1984, the CME was investigated by the U.S. Government Accountability Office. During this investigation, it was realized that the open-outcry system could be abused. The GAO noted that the exchange made attempts to cut down on malpractice, but that it is likely that illegal activity still occurs.<ref>{{Cite journal|last=Simmons|first=Craig|date=1989|title=Chicago Futures Market: Initial Observations on Trade Practice Abuses|pages=3–6}}</ref>
In 1984, the CME was investigated by the U.S. Government Accountability Office. During this investigation, it was realized that the open-outcry system could be abused. The GAO noted that the exchange made attempts to cut down on malpractice, but that it is likely that illegal activity still occurs.<ref>{{Cite journal|last=Simmons|first=Craig|date=1989|title=Chicago Futures Market: Initial Observations on Trade Practice Abuses|pages=3–6}}</ref>

== Products ==
== Products ==
The Chicago Mercantile Exchange was known as the Chicago Butter and Egg Board when it was founded in 1898, and futures available through the exchange were initially limited to agricultural products.<ref name="Wang">{{cite book |author=Peijie Wang |url=https://www.google.com/books/edition/The_Economics_of_Foreign_Exchange_and_Gl/fRFer11WaoIC?hl=en&gbpv=1&dq=The+Chicago+Mercantile+Exchange+was+founded+in+1898+as+the+%22Chicago+Butter+and+Egg+Board&pg=PA256&printsec=frontcover |title=The Economics of Foreign Exchange and Global Finance |publisher=[[Springer Science+Business Media|Springer]] |isbn=9783662592717 |page=256 |access-date=November 28, 2022}}</ref><ref name="Pederson">{{cite book |title=International Directory of Company Histories |date=2006 |publisher=[[Gale_(publisher)|St. James Press]] |editor=Jay P. Pederson |volume=75 |location=US}}</ref> The name changed in 1919 and CME soon expanded to offer four core financial instruments: commodities, foreign exchange, interest rates, and stock indexes.<ref name="Wang" /><ref name="McDowell">{{cite book |author=Bennett A. McDowell |url=https://www.google.com/books/edition/The_ART_of_Trading/zTLJNhokjdwC?hl=en&gbpv=0 |title=The ART of Trading – Combining the Science of Technical Analysis with the Art of Reality-Based Trading |publisher=[[Wiley]] |isbn=9781118039380 |access-date=November 28, 2022}}</ref> As of 2022, CME operates as one of the designated contract markets with the [[CME Group]] and offers a number of derivatives products, including commodities, equity indices, foreign exchange, interest rates, and weather.<ref name="Kumar">{{cite book |last=Kumar |first=Rajesh |url=https://www.google.com/books/edition/Strategies_of_Banks_and_Other_Financial/UwN0AwAAQBAJ?hl=en&gbpv=1&dq=the+CME+offers+trading+in+forex+futures,+currencies,+stock+indexes,+interest+rate+futures,+and+agricultural+products.&pg=PA140&printsec=frontcover |title=Strategies of Banks and Other Financial Institutions: Theories and Cases |date=2014 |publisher=[[Elsevier]] |isbn=9780124171671 |page=140 |access-date=November 28, 2022}}</ref><ref name="Wang" /><ref name="dxFeed">{{cite news |title=Chicago Mercantile Exchange (CME) |work=dxFeed |publisher=Devexperts Inc. |url=https://dxfeed.com/market-data/futures/cme/ |access-date=November 29, 2022}}</ref> For example, as of 2017, agricultural contracts were offered on products such as wheat, corn, soybeans, and [[Lean Hog|lean hogs]].<ref>{{Cite journal |last=Consuegra |first=Meliyara |last2=Garcia-Verdugo |first2=Javier |date=15 December 2016 |title=Measuring the functional efficiency of agricultural futures markets |url=https://onlinelibrary.wiley.com/doi/10.1111/1467-8489.12196 |journal=Australian Journal of Agricultural and Resource Economics |language=en |volume=61 |issue=2 |pages=232–246 |doi=10.1111/1467-8489.12196}}</ref> In metal futures, the CME trades [[Precious metal|precious metals]], while the [[London Metal Exchange]] deals in industrial metals.<ref>{{Cite journal |last=Mensi |first=Walid |last2=Vo |first2=Xuan Vinh |last3=Kang |first3=Sang Hoon |date=2022-06-01 |title=Upward/downward multifractality and efficiency in metals futures markets: The impacts of financial and oil crises |url=https://www.sciencedirect.com/science/article/pii/S0301420722000940 |journal=Resources Policy |language=en |volume=76 |pages=102645 |doi=10.1016/j.resourpol.2022.102645 |issn=0301-4207}}</ref> The Chicago Mercantile Exchange is the only market for trading in weather derivatives. It launched its first weather products in 1999. Products include, but are not limited to: futures on rainfall, snowfall, hurricanes, and temperature.<ref>{{Cite book |last=Benth, Espen, Jurate |title=Modeling And Pricing In Financial Markets For Weather Derivatives |publisher=World Scientific |year=2012 |location=Singapore |pages=100}}</ref><ref>{{Cite journal |last=Bemš |first=Július |last2=Aydin |first2=Caner |date=18 November 2021 |title=Introduction to weather derivatives |url=https://onlinelibrary.wiley.com/doi/10.1002/wene.426 |journal=WIREs Energy and Environment |language=en |volume=11 |issue=3 |doi=10.1002/wene.426 |issn=2041-8396}}</ref>
=== Agricultural Commodity ===
Agricultural Commodity Contracts include: Grains, Soybeans, Oilseeds, Live Cattle, [[Lean Hog]]s, Feeder Cattle, Class IV Milk, Class III Milk, Nonfat Dry Milk Powder, Dry Whey, Cheese, Butter, and [[Random Length Lumber]].<ref>{{Cite book|title=Plant Sciences|last=Larson|first=Donald|publisher=Gale|year=2011}}</ref>

=== Cryptocurrency ===
Since December 2017 [[bitcoin]] futures are traded.<ref>{{cite web|url=http://www.cmegroup.com/trading/equity-index/us-index/bitcoin.html|title=Bitcoin Futures Quotes - CME Group|website=www.cmegroup.com}}</ref> [[Ethereum|Ether]] futures are traded since February 2021.<ref>{{Cite web|title=Ether Futures Quotes - CME Group|url=https://www.cmegroup.com/content/cmegroup/en/trading/equity-index/us-index/ether.html|access-date=2021-02-07|website=www.cmegroup.com|language=en}}</ref>

=== Energy ===
WTI Crude, Henry Hub Natural Gas, Brent Crude, and [[Reformulated Blendstock for Oxygenate Blending|RBOB]] Gasoline.<ref>{{cite web|url=https://www.cmegroup.com/markets/energy.html|title=Energy Products - CME Group|access-date=2021-02-04}}</ref>

=== Equity Index Products ===
Equity Index Products include: E-mini S&P 500 Futures, S&P 500 Futures, E-mini Nasdaq-100 Futures, Nikkei/Yen Futures, E-mini Dow ($5) Futures, E-mini Russel 2000 Index Futures, Bitcoin Futures, Yen Denominated TOPIX Futures, Micro E-mini S&P 500 Futures, Micro E-mini Nasdaq-100 Index Futures, Micro E-mini Russel 2000 Index Futures, Micro E-mini Dow Jones Industrial Average Index Futures. There are also index products that follow specific international indexes and select sectors.<ref>{{Cite web|url=https://www.cmegroup.com/content/cmegroup/en/trading/equity-index/index.html|title=Equity Index Products - CME Group|website=www.cmegroup.com|language=en|access-date=2019-11-27}}</ref>

=== Interest Rate Products ===
Interest rate products include:<ref>{{Cite web|url=http://www.cmegroup.com/trading/interest-rates/|title=Interest Rates Products - CME Group|website=www.cmegroup.com|language=en|access-date=2019-12-02}}</ref>
{| class="wikitable"
|+
!Name
!Code
|-
|Eurodollar Futures
|GE
|-
|One-Month SOFR Futures
|SR1
|-
|Three Month SOFR Futures
|SR3
|-
|10-Year T-Note Futures
|ZN
|-
|Ultra 10-Year US Treasury Future Notes
|TN
|-
|30 Day Federal Funds Futures
|ZQ
|-
|2-Year Eris Swap Futures
|LIT
|-
|10-Year USD MAC Swap Futures
|N1U
|}

=== Foreign Exchange Products ===
Foreign Exchange featured products include:<ref>{{Cite web|url=https://www.cmegroup.com/content/cmegroup/en/trading/fx/index.html|title=FX Products - CME Group|website=www.cmegroup.com|language=en|access-date=2019-11-28}}</ref>
{| class="wikitable"
|+
!Name
!Code
|-
|Euro Fx Futures
|6E
|-
|Japanese Yen Futures
|6J
|-
|British Pound Futures
|6B
|-
|Australian Dollar Futures
|6A
|-
|Mexican Peso Futures
|6M
|-
|New Zealand Dollar Futures
|6N
|-
|Russian Ruble Futures
|6R
|-
|Brazilian Real Futures
|6L
|-
|Indian Rupee/ USD Futures
|SIR
|-
|Standard Size USD/Offshore RMB (CNH) Futures
|CNH
|}
Foreign Exchange products also include futures for G10 currencies, Emerging market currencies, and Cross rates.

=== Metals Products ===
Metals Products include:<ref>{{Cite web|url=http://www.cmegroup.com/trading/metals/index.html|title=Metals Products - CME Group|website=www.cmegroup.com|language=en|access-date=2019-12-02}}</ref>
{| class="wikitable"
|+
!Name
!Code
|-
|Gold Futures
|GC
|-
|Copper Futures
|HG
|-
|Silver Futures
|SI
|-
|Micro Gold Futures
|MGC
|-
|Gold Option
|OG
|-
|Platinum Futures
|PL
|-
|Silver Option
|SO
|-
|Palladium Futures
|PA
|}

=== Weather Derivatives ===
The Chicago Mercantile Exchange is the only market for trading in weather derivatives. It launched its first weather products in 1999. Products include, but are not limited to: futures on rainfall, snowfall, hurricanes, and temperature.<ref>{{Cite book|title=Modeling And Pricing In Financial Markets For Weather Derivatives|last=Benth, Espen, Jurate|publisher=World Scientific|year=2012|location=Singapore|pages=100}}</ref>


==See also==
==See also==

Revision as of 16:21, 23 January 2023

"The Merc" redirects here. For the San Jose newspaper, see The Mercury News.
Chicago Mercantile Exchange
Company typeSubsidiary
IndustryBusiness services
Founded1898
HeadquartersChicago, Illinois
ProductsFutures and options
OwnerCME Group
WebsiteGroup website
Chicago Mercantile Exchange building

The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an agricultural commodities exchange. For most of its history, the exchange was in the then common form of a non-profit organization, owned by members of the exchange. The Merc demutualized in November 2000, went public in December 2002, and merged with the Chicago Board of Trade in July 2007 to become a designated contract market of the CME Group Inc., which operates both markets. The chairman and chief executive officer of CME Group is Terrence A. Duffy, Bryan Durkin is president.[1] On August 18, 2008, shareholders approved a merger with the New York Mercantile Exchange (NYMEX) and COMEX. CME, CBOT, NYMEX, and COMEX are now markets owned by CME Group. After the merger, the value of the CME quadrupled in a two-year span, with a market cap of over $25 billion.[2]

Today, CME is the largest options and futures contracts open interest (number of contracts outstanding) exchange of any futures exchange in the world. The Merc trades several types of financial instruments: interest rates, equities, currencies, and commodities.

CME also pioneered the CME SPAN software that is used around the world as the official performance bond (margin) mechanism of 50 registered exchanges, clearing organizations, service bureaus, and regulatory agencies throughout the world.

Trading platforms

Trading is conducted in two methods; an open outcry format and the CME Globex Trading System which is an electronic trading platform. More than 90 percent of total volume at the exchange occurs electronically on CME Globex.

Open outcry

Operating during regular trading hours (RTH), the open outcry method consists of floor traders standing in a trading pit to call out orders, prices, and quantities of a particular commodity or its derivatives. Different colored jackets are worn by the traders to indicate what firm they are a part of. In addition, complex hand signals (called Arb) are used. These hand signals were first used in the 1970s. Today, however, headsets are also used by the brokers to communicate with the traders. The pits are areas of the floor that are lowered to facilitate communication, somewhat like a miniature amphitheater. The pits can be raised and lowered depending on trading volume. To an onlooker, the open outcry system can look chaotic and confusing, but in reality, the system is a tried and true method of accurate and efficient trading. An illustrated project to record the hand signal language used in CME's trading pits has been compiled.[3]

President George W. Bush at the CME (March 6, 2001)

CME Group recently announced that it will permanently close most of its physical trading pits, including those for grain trading. They had been closed since March 2020 due to the outbreak of the COVID-19 pandemic.[4]

Electronic trading

Operating virtually around the clock, today the CME Globex Trading System is at the heart of CME. Proposed in 1987, it was introduced in 1992 as the first global electronic trading platform for futures contracts. This fully electronic trading system allows market participants to trade from booths at the exchange or while sitting in a home or office thousands of miles away. On 19 October 2004, the one billionth (1,000,000,000) transaction was recorded.

When CME Globex was first launched, it used Reuters' technology and network.[5] September 1998 saw the launch of the second generation of CME Globex using a modified version of the NSC[clarification needed] trading system, developed by Paris Bourse for the MATIF (now Euronext).[6]

Traders connect to CME Globex via Market Data Protocol (MDP) and iLink 2.0 for order routing.

Mergers and acquisitions

On October 17, 2006, the Chicago Mercantile Exchange announced the purchase of the Chicago Board of Trade for $8 billion in stock, rejoining the two financial institutions as CME Group Inc. CBOT formerly used outsourced technology platforms but has moved over to CME's Globex trading system. This will provide much of the merger's anticipated savings. The merger will also strengthen the combined group's position in the global derivatives market.[7] The merger agreement was modified on December 20, 2006,[8] May 11, 2007,[9] June 14, 2007,[10] and on July 6, 2007.[11] The merger agreement was passed by shareholders of both CME and the Chicago Board of Trade on July 9, 2007.[12] The merger officially closed on July 12, 2007, after which the Chicago Board of Trade shares (old symbol: BOT) stopped trading and were converted into CME shares as agreed, and the overarching holding company began life as CME Group, a CME/Chicago Board of Trade Company.[13] On January 13, 2008, electronic trading at the Chicago Board of Trade shifted onto CME Globex.[14]

On March 17, 2008, the New York Mercantile Exchange (NYMEX) accepted an offer from CME Group, the parent of the Chicago Mercantile Exchange, to purchase NYMEX for $8.9 billion in cash and CME Group Stock.[15] The acquisition was formally completed on August 22, 2008, and the NYMEX systems were fully integrated by September 30, 2009.[16]

Investigation

In 1984, the CME was investigated by the U.S. Government Accountability Office. During this investigation, it was realized that the open-outcry system could be abused. The GAO noted that the exchange made attempts to cut down on malpractice, but that it is likely that illegal activity still occurs.[17]

Products

The Chicago Mercantile Exchange was known as the Chicago Butter and Egg Board when it was founded in 1898, and futures available through the exchange were initially limited to agricultural products.[18][19] The name changed in 1919 and CME soon expanded to offer four core financial instruments: commodities, foreign exchange, interest rates, and stock indexes.[18][20] As of 2022, CME operates as one of the designated contract markets with the CME Group and offers a number of derivatives products, including commodities, equity indices, foreign exchange, interest rates, and weather.[21][18][22] For example, as of 2017, agricultural contracts were offered on products such as wheat, corn, soybeans, and lean hogs.[23] In metal futures, the CME trades precious metals, while the London Metal Exchange deals in industrial metals.[24] The Chicago Mercantile Exchange is the only market for trading in weather derivatives. It launched its first weather products in 1999. Products include, but are not limited to: futures on rainfall, snowfall, hurricanes, and temperature.[25][26]

See also

References

  • Durica, Dr. Michael (2006). Product Development for Electronic Derivative Exchanges: The case of the German ifo business climate index as underlying for exchange traded derivatives to hedge business cycle risk. Pro Business. Berlin. ISBN 3-939533-05-X.

Further reading

Notes

  1. ^ "CMEgroup.com". Investor.cmegroup.com. Retrieved 2012-09-22.
  2. ^ Encyclopedia of American Industries. Gale. 2011. p. 2432.
  3. ^ "CME Trading Pit Hand Signals History". tradingpithistory.com. Retrieved 16 August 2011.
  4. ^ "CME permanently closes open outcry trading". World-Grain.com. 2021-05-10.
  5. ^ "Deflating Globex: electronic exchanges". The Economist. 21 May 1994. Archived from the original on 24 September 2018. Retrieved 24 September 2018 – via Highbeam.
  6. ^ "Reuters Dumped from Trading Service". Wired. 21 February 1997.
  7. ^ "CME news release October 17, 2006".
  8. ^ "Merger agreement modified December 20, 2006".
  9. ^ "Merger agreement modified May 11, 2007".
  10. ^ "Merger agreement modified June 14, 2007".
  11. ^ "Merger agreement modified July 6, 2007".
  12. ^ "Merger agreement passed July 9, 2007".
  13. ^ "CME Group began operations July 13, 2007".
  14. ^ Saphir, Ann (2008-03-03). "Trading Places". Crain's Chicago Business. Crain Communications Inc.
  15. ^ "CMEgroup.com". Cmegroup.mediaroom.com. Retrieved 2012-09-22.
  16. ^ "CMEgroup.com". Investor.cmegroup.com. Retrieved 2012-09-22.
  17. ^ Simmons, Craig (1989). "Chicago Futures Market: Initial Observations on Trade Practice Abuses": 3–6. {{cite journal}}: Cite journal requires |journal= (help)
  18. ^ a b c Peijie Wang. The Economics of Foreign Exchange and Global Finance. Springer. p. 256. ISBN 9783662592717. Retrieved November 28, 2022.
  19. ^ Jay P. Pederson, ed. (2006). International Directory of Company Histories. Vol. 75. US: St. James Press.
  20. ^ Bennett A. McDowell. The ART of Trading – Combining the Science of Technical Analysis with the Art of Reality-Based Trading. Wiley. ISBN 9781118039380. Retrieved November 28, 2022.
  21. ^ Kumar, Rajesh (2014). Strategies of Banks and Other Financial Institutions: Theories and Cases. Elsevier. p. 140. ISBN 9780124171671. Retrieved November 28, 2022.
  22. ^ "Chicago Mercantile Exchange (CME)". dxFeed. Devexperts Inc. Retrieved November 29, 2022.
  23. ^ Consuegra, Meliyara; Garcia-Verdugo, Javier (15 December 2016). "Measuring the functional efficiency of agricultural futures markets". Australian Journal of Agricultural and Resource Economics. 61 (2): 232–246. doi:10.1111/1467-8489.12196.
  24. ^ Mensi, Walid; Vo, Xuan Vinh; Kang, Sang Hoon (2022-06-01). "Upward/downward multifractality and efficiency in metals futures markets: The impacts of financial and oil crises". Resources Policy. 76: 102645. doi:10.1016/j.resourpol.2022.102645. ISSN 0301-4207.
  25. ^ Benth, Espen, Jurate (2012). Modeling And Pricing In Financial Markets For Weather Derivatives. Singapore: World Scientific. p. 100.{{cite book}}: CS1 maint: multiple names: authors list (link)
  26. ^ Bemš, Július; Aydin, Caner (18 November 2021). "Introduction to weather derivatives". WIREs Energy and Environment. 11 (3). doi:10.1002/wene.426. ISSN 2041-8396.

External links

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