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The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in
Chicago (''City in a Garden''); I Will , image_map = , map_caption = Interactive Map of Chicago , coordinates = , coordinates_footnotes = , subdivision_type = List of sovereign states, Count ...

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. Originally, the exchange was a non-profit organization. The Merc demutualized in November 2000, went public in December 2002, and merged with the
Chicago Board of Trade The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures exchange, futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and ...

Chicago Board of Trade
in July 2007 to become a designated contract market of 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 ...
Inc., which operates both markets. The chairman and chief executive officer of CME Group is Terrence A. Duffy, Bryan Durkin is president. On August 18, 2008, shareholders approved a merger with the
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 ...

New York Mercantile Exchange
(NYMEX) and COMEX. CME,
CBOT
CBOT
,
NYMEX 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 ...

NYMEX
, and
COMEX
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. Today, CME is the largest options and
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
open interest Open interest (also known as open contracts or open commitments) refers to the total number of outstanding derivative In mathematics Mathematics is an area of knowledge that includes the topics of numbers, formulas and related structur ...
(number of contracts outstanding) exchange of any futures exchange in the world. The Merc trades several types of
financial instrument Financial instruments are monetary Contract, contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership interest in an entity or a contractual right to receive or deliver in ...
s:
interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
s,
equities In finance, stock (also capital stock) consists of all the Share (finance), shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which owners ...
,
currencies
currencies
, and
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 ...
. CME also pioneered the CME SPAN software that is used around the world as the official
performance bond A performance bond, also known as a contract bond, is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a independent contractor, contractor. The term is also used to denote a collateral dep ...
(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 Open outcry is a method of communication between professionals on a stock exchange A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and stock trader, traders can buy and se ...
format and the CME Globex Trading System which is an
electronic trading platform In finance, an electronic trading platform also known as an online trading platform, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products ...
. 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 Open outcry is a method of communication between professionals on a stock exchange A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and stock trader, traders can buy and se ...
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 An amphitheatre (British English British English (BrE, en-GB, or BE) is, according to Oxford Dictionaries, " English as used in Great Britain, as distinct from that used elsewhere". More narrowly, it can refer specifically to the Engli ...

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. 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.


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 In finance, an electronic trading platform also known as an online trading platform, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products ...
for
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. 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 Reuters ( ) is a news agency owned by Thomson Reuters Corporation. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide. Reuters is one of the largest news agencies in the world. The agency was establ ...
' technology and network. September 1998 saw the launch of the second generation of CME Globex using a modified version of the NSC trading system, developed by
Paris Bourse Euronext Paris is France's securities market, formerly known as the Paris Bourse, which merged with the Amsterdam, Lisbon, and Brussels exchanges in September 2000 to form Euronext NV. As of 2022, the 795 companies listed had a combined market ...
for the MATIF (now
Euronext Euronext N.V. (short for European New Exchange Technology) is a pan-European Exchange (organized market), bourse that offers various trading and post-trade services. Traded assets include regulated equities, exchange-traded funds (ETF), warrants ...
). 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 The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures exchange, futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and ...

Chicago Board of Trade
for $8 billion in stock, rejoining the two financial institutions as ''
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 ...
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. The merger agreement was modified on December 20, 2006, May 11, 2007, June 14, 2007, and on July 6, 2007. The merger agreement was passed by shareholders of both CME and the Chicago Board of Trade on July 9, 2007. 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. On January 13, 2008, electronic trading at the Chicago Board of Trade shifted onto CME Globex. On March 17, 2008, the
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 ...

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. The acquisition was formally completed on August 22, 2008, and the NYMEX systems were fully integrated by September 30, 2009.


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.


Products


Agricultural Commodity

Agricultural Commodity Contracts include: Grains, Soybeans, Oilseeds, Live Cattle, Lean Hogs, Feeder Cattle, Class IV Milk, Class III Milk, Nonfat Dry Milk Powder, Dry Whey, Cheese, Butter, and Random Length Lumber.


Cryptocurrency

Since December 2017
bitcoin Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public dist ...

bitcoin
futures are traded.
Ether In organic chemistry, ethers are a class of organic compound, compounds that contain an ether functional group, group—an oxygen atom connected to two alkyl or aryl groups. They have the general formula , where R and R′ represent the alkyl o ...

Ether
futures are traded since February 2021.


Energy

WTI Crude, Henry Hub Natural Gas, Brent Crude, and RBOB Gasoline.


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.


Interest Rate Products

Interest rate products include:


Foreign Exchange Products

Foreign Exchange featured products include: Foreign Exchange products also include futures for G10 currencies, Emerging market currencies, and Cross rates.


Metals Products

Metals Products include:


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.


See also

*
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 ...
*
Demutualization Demutualization is the process by which a customer-owned mutual organization (''mutual'') or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, member ...
*
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 * Securities market participants (United States)


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. .


Further reading

* * * *


Notes


External links


CME Group Inc. website
{{Authority control Financial services companies established in 1898 1898 establishments in Illinois Commodity exchanges in the United States Self-regulatory organizations in the United States Companies based in Chicago Futures exchanges Economy of Chicago CME Group