The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global

derivatives market The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets. The market can be divided into two, that for exchange-traded derivatives a ...

place 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 ...

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 and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exch ...

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 clas ...

Inc., which operates both markets. The chairman and chief executive officer of CME Group is

Terrence A. Duffy Terrence A. Duffy (born 1958) is an American businessman. He is the chairman and chief executive officer of CME Group, a derivatives marketplace based in Chicago, Illinois. Duffy began working at the Chicago Mercantile Exchange in 1980. He joi ...

, 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 in the Battery Park City section of Manhattan, New York City. T ...

(NYMEX) and COMEX. CME, 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 in the Battery Park City section of Manhattan, New York City. ...

, 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. Today, CME is the largest

options Option or Options may refer to: Computing *Option key, a key on Apple computer keyboards *Option type, a polymorphic data type in programming languages *Command-line option, an optional parameter to a command *OPTIONS, an HTTP request method ...

and

futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

open interest Open interest (also known as open contracts or open commitments) refers to the total number of outstanding derivative contracts that have not been settled (offset by delivery). For each buyer of a futures contract there must be a seller. From the ...

(number of contracts outstanding) exchange of any futures exchange in the world. The Merc trades several types of

financial instrument Financial instruments are monetary 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 the form ...

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, t ...

equities In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...

, currencies, and

commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

. CME also pioneered the

CME SPAN The Standard Portfolio Analysis of Risk, or SPAN, is a system for calculating margin requirements for futures and options on futures. It was developed by the Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the C ...

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 contractor. The term is also used to denote a collateral deposit of good faith mo ...

(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 or futures exchange, typically on a trading floor. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orde ...

format and the

CME Globex Trading System CME. or cme, can refer to any of the following: Organizations * Canadian Military Engineers, the military engineer branch of the Canadian Forces * Central European Media Enterprises * Central Music Company (CME), Beijing, China * Christian Me ...

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

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) or amphitheater (American English; both ) is an open-air venue used for entertainment, performances, and sports. The term derives from the ancient Greek ('), from ('), meaning "on both sides" or "around" and ...

. 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 The Globex Trading System which was introduced in 1992, was the first global electronic trading system designed to handle both futures trading and options trading. It was developed by the Chicago Mercantile Exchange (CME) along with other technolog ...

is at the heart of CME. Proposed in 1987, it was introduced in 1992 as the first global

for

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 est ...

' 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 MATIF SA ( French: ''Marché à Terme International de France'') is a private corporation which is both a futures exchange and a clearing house in France. It was absorbed in the merger of the Paris Bourse with Euronext NV to form Euronext Paris. ...

(now

Euronext Euronext N.V. (short for European New Exchange Technology) is a pan-European bourse that offers various trading and post-trade services. Traded assets include regulated equities, exchange-traded funds (ETF), warrants and certificates, bonds, ...

). 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

for $8 billion in stock, rejoining the two financial institutions as ''

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

. 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

(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 Hog Lean Hog is a type of hog (pork) futures contract that can be used to hedge and to speculate on pork prices in the US. Lean Hog futures and options are traded on the Chicago Mercantile Exchange (CME), which introduced Lean Hog futures contracts i ...

s, Feeder Cattle, Class IV Milk, Class III Milk, Nonfat Dry Milk Powder, Dry Whey, Cheese, Butter, and

Random Length Lumber Spruce-pine-fir (SPF) is a classification of lumber that can be traded on commodities exchanges. In Canada, and parts of the United States, most of the spruce tree species, pine tree species, and fir tree species share similar physical and me ...

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 distr ...

futures are traded.

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

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.

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. .

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