Chicago Board of Trade
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The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the
Chicago Mercantile Exchange 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 a ...
(CME) to form
CME Group CME Group Inc. (Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, The Commodity Exchange) is an American global markets company. It is the world's largest financial derivatives exchange, and trades in asset class ...
. CBOT and three other exchanges (CME, NYMEX, and COMEX) now operate as designated contract markets (DCM) of the CME Group.


History

The concerns of U.S.
merchant A merchant is a person who trades in Commodity, commodities produced by other people, especially one who trades with foreign countries. Historically, a merchant is anyone who is involved in commerce, business or trade. Merchants have operated fo ...
s to ensure that there were buyers and sellers for
commodities In economics, a commodity is an economic goods, good, usually a resource, that has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to who Production ...
have resulted in
forward contract In finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumpt ...
s to sell and buy commodities. Still,
credit risk A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased ...
remained a serious problem. The CBOT took shape to provide a centralized location, where buyers and sellers can meet to negotiate and formalize forward contracts. An early 1848 discussion between Thomas Richmond and W. L. Whiting regarding the propriety of creating a board of trade led to the March 13 meeting merchants and businessmen in favor of establishing it and a resulting resolution for such an establishment and a Constitution. A committee then developed bylaws that were adopted on the first Monday of April by 82 charter members of the Board of Trade. In 1864, the CBOT listed the first ever standardized "exchange traded" forward contracts, which were called
futures contract In finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumpti ...
s. In 1919, the Chicago Butter and Egg Board, a spin-off of the CBOT, was reorganized to enable member traders to allow future trading, and its name was changed to
Chicago Mercantile Exchange 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 a ...
(CME). The Board's restrictions on trading after hours on any prices other than those at the Board's close gave rise to the 1917 case '' Chicago Board of Trade v. United States'', in which the U.S. Supreme Court held that the
Sherman Antitrust Act of 1890 The Sherman Antitrust Act of 1890 (, ) is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by United States Congress, Congress and is named for Senator John Sherman, i ...
's language outlawing "every contract ... in restraint of trade" was not to be taken literally, but rather should be interpreted under a "rule of reason." On October 19, 2005, the
initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically Underwriting, underwritten by one or mo ...
(IPO) of 3,191,489 CBOT shares was priced at $54.00 (USD) per share. On its first day of trading the stock closed up +49% at $80.50 (USD) on the
NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District, Manhattan, Financial District of Lower Manhattan in New York City. It is by far the List of stock exchanges, world's largest s ...
. In 2007, the CBOT and the
Chicago Mercantile Exchange 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 a ...
merged to form the
CME Group CME Group Inc. (Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, The Commodity Exchange) is an American global markets company. It is the world's largest financial derivatives exchange, and trades in asset class ...
.


Chicago Board of Trade Building

Since 1930, the Chicago Board of Trade has been operating out of 141 West Jackson Boulevard, Chicago, in a building designed by
architect An architect is a person who plans, designs and oversees the construction of buildings. To practice architecture means to provide services in connection with the design of buildings and the space within the site surrounding the buildings that h ...
s
Holabird & Root The architect, architectural firm now known as Holabird & Root was founded in Chicago in 1880. Over the years, the firm has changed its name several times and adapted to the architectural style then current — from Chicago school (architectur ...
that is 605 feet (184 m) tall, the tallest in Chicago until the Richard J. Daley Center superseded it in 1965. This
Art Deco Art Deco, short for the French ''Arts Décoratifs'', and sometimes just called Deco, is a style of visual arts, architecture, and product design, that first appeared in France in the 1910s (just before World War I World War I (28 Jul ...
building incorporates sculptural work by Alvin Meyer and is capped by a 31-foot (9.5 m) tall statue of the Roman
goddess A goddess is a female deity. In many known cultures, goddesses are often linked with literal or metaphorical pregnancy or imagined feminine roles associated with how women and girls are perceived or expected to behave. This includes themes of s ...
Ceres in reference to the exchange's heritage as a
commodity market A commodity market is a Market (economics), market that trades in the Primary sector of the economy, primary economic sector rather than manufactured products, such as Cocoa bean, cocoa, fruit and sugar. Hard commodities are mined, such as gol ...
. ''Ceres'' is often claimed to be faceless because its sculptor, John Storrs, believed that the forty-five story building would be sufficiently taller than any other nearby structure and as a result that no one would be able to see the sculpture's face anyway. However, this popular rumor was disproved, with the sculptor intending to give the statue an ethereal and god-like look by being faceless. On May 4, 1977, the
Chicago Board of Trade Building The Chicago Board of Trade Building is a 44-story, Art Deco skyscraper located in the Chicago Loop, standing at the foot of the LaSalle Street canyon. Built in 1930 for the Chicago Board of Trade (CBOT), it has served as the primary trading ve ...
was designated a
Chicago Landmark Chicago Landmark is a designation by the Mayor of Chicago, Mayor and the City Council of Chicago for historic sites in Chicago, Illinois, United States. Listed sites are selected after meeting a combination of criteria, including historical, ...
. The building is now a
National Historic Landmark A National Historic Landmark (NHL) is a National Register of Historic Places property types, building, district, object, site, or structure that is officially recognized by the Federal government of the United States, United States government fo ...
. Today the Board of Trade Building is closely joined by numerous
skyscraper A skyscraper is a tall continuously habitable building having multiple floors. Modern sources currently define skyscrapers as being at least or in height, though there is no universally accepted definition. Skyscrapers are very tall Tower bl ...
s in the heart of Chicago's busy Loop commercial neighborhood.


Trading platforms


The Pit

The pit is a raised
octagon In geometry Geometry (; ) is, with arithmetic, one of the oldest branches of mathematics. It is concerned with properties of space such as the distance, shape, size, and relative position of figures. A mathematician who works in the field of ...
al structure where open-outcry trading takes place. Operating during regular trading hours (RTH), the CBOT trading floor contains many such pits. The steps up on the outside of the
octagon In geometry Geometry (; ) is, with arithmetic, one of the oldest branches of mathematics. It is concerned with properties of space such as the distance, shape, size, and relative position of figures. A mathematician who works in the field of ...
and the steps down on the inside give the pit something of the appearance of an amphitheater, and allow hundreds of traders to see and hear each other during trading hours. The importance of the pit and pit trading is emphasized by the use of a stylized pit as the logo of the CBOT. ''The Pit'' is also the title and subject of a classic novel (1903) by
Frank Norris Benjamin Franklin Norris Jr. (March 5, 1870 – October 25, 1902) was an American journalist and novelist during the Progressive Era, whose fiction was predominantly in the naturalism (literature), naturalist genre. His notable works include ''M ...
. Trades are made in the pits by bidding or offering a price and quantity of contracts, depending on the intention to buy (bid) or sell (offer). This is generally done by using a physical representation of a trader's intentions with his hands. If a trader wants to buy ten contracts at a price of eight, for example, in the pit he would yell "8 for 10", stating price before quantity, and turn his palm inward toward his face, putting his index finger to his forehead denoting ten; if he were to be buying one, he would place his index finger on his chin. If the trader wants to sell five contracts at a price of eight, they would yell "5 at 8", stating quantity before price, and show one hand with palm facing outward, showing 5 fingers. The combination of hand-signals and vocal representation between the way a trader expresses bids and offers is a protection against misinterpretation by other market participants. For historical purposes, an illustrated project to record the hand signal language used in CBOT's trading pits has been compiled and published. With the rise of electronic trading the importance of the pit has decreased substantially for many contracts, though the pit remains the best place to get complex option spreads filled.


News lines

* On August 1, 1974, trading at The Chicago Board of Trade was halted after an anonymous caller said a bomb had been placed in the building. * On October 22, 1981, trading was halted on the Chicago Board of Trade and the
Philadelphia Stock Exchange Philadelphia Stock Exchange (PHLX), now known as Nasdaq PHLX, is the first stock exchange A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and stock trader, traders can buy and ...
after anonymous callers said bombs had been placed in those buildings. * On August 1, 2006, the CBOT launched side-by-side trading for agricultural futures. Orders can now be traded electronically or placed by pit traders using open outcry, creating a single pool of
liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liqui ...
. * On October 17, 2006, the
Chicago Mercantile Exchange 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 a ...
announced the purchase of the Chicago Board of Trade for $8 billion in stock, joining the two financial institutions as CME Group, Inc. * On July 9, 2007 CBOT Shareholders approve merger with the
Chicago Mercantile Exchange 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 a ...
"creating the largest derivatives market ever."


See also

* Chicago Board of Trade Independent Battery Light Artillery *
Commodity Exchange Act Commodity Exchange Act (ch. 545, , enacted June 15, 1936) is a federal act enacted in 1936 by the U.S. Government, with some of its provisions amending the Grain Futures Act of 1922. The Act provides federal regulation of all commodities and futu ...
* Horatio G. Loomis *
List of futures exchanges This is a list of notable futures exchanges. Those stock exchange A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and stock trader, traders can buy and sell security ...
*
List of traded commodities The following is a list of futures contracts on physically traded commodity, commodities. Agricultural Grains, food and fiber Symbol from "CME Group Website". cmegroup.com. CME Group. Retrieved 2010-10-20. Livestock and meat Energy Fore ...
*
New York Mercantile Exchange The New York Mercantile Exchange (NYMEX) is a commodity futures exchange owned and operated by CME Group of Chicago. NYMEX is located at One North End Avenue in Brookfield Place (New York City), Brookfield Place in the Battery Park City sectio ...
* '' Board of Trade of City of Chicago v. Olsen'' 262 U.S. 1 (1923) * '' Chicago Board of Trade v. Christie Grain'' 198 U.S. 236 (1905)


References

Notes Bibliography * 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. . * Ryan, Oliver (Nov. 14, 2005). "Chicago's Making A Contracts Killing". '' FORTUNE'', p. 22. Further reading * * * ''Leg the Spread: A Woman's Adventures Inside the Trillion-Dollar Boys' Club of Commodities Trading'' by Cari Lynn (Random House/Broadway Books


External links


Chicago Board of Trade

Interior Tour of the Chicago Board of Trade: Inside Chicago Walking Tours
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The CME Group Collections at University of Illinois at Chicago

TradingPitHistory.com
A website to preserve the trading pit hand signals used at CBOT

* ttp://www.cmegroup.com/ CME Group
Commodities Trader at the Chicago Board of Trade

News on the Merger: Chicago bulls
{{DEFAULTSORT:Chicago Board Of Trade Commodity exchanges in the United States Companies based in Chicago Economy of Chicago 1848 establishments in Illinois Futures exchanges Financial regulatory authorities of the United States