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. The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...

merchant A merchant is a person who trades in commodities produced by other people, especially one who trades with foreign countries. Historically, a merchant is anyone who is involved in business or trade. Merchants have operated for as long as indust ...

s to ensure that there were buyers and sellers for commodities have resulted in

forward contract In finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed on at the time of conclusion of the contract, making it a type of deriva ...

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, 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 ...

s. In 1919, the

Chicago Butter and Egg Board The Chicago Butter and Egg Board, founded in 1898, was a spin-off entity of the Chicago Produce Exchange. In the year 1919, it was re-organized as the Chicago Mercantile Exchange (CME). Roots of the Chicago Butter and Egg Board are traceable to the ...

, a spin-off of the CBOT, was reorganized to enable member traders to allow future trading, and its name was changed to

(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 ''Chicago Board of Trade v. United States'', 246 U.S. 231 (1918), was a case in which the Supreme Court of the United States applied the " rule of reason" to the internal trading rules of a commodity market. Section 1 of the Sherman Act flatly st ...

'', in which the

U.S. Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...

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 Congress and is named for Senator John Sherman, its principal author. T ...

'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 underwritten by one or more investment ...

(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

merged to form the

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 ...

Holabird & Root The 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 to Art Deco to Modern ...

that is 605 feet (184 m) tall, the tallest in Chicago until the

Richard J. Daley Center The Richard J. Daley Center, also known by its open courtyard Daley Plaza and named after longtime mayor Richard J. Daley, is the premier civic center of the City of Chicago in Illinois. The Center's modernist skyscraper primarily houses of ...

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), and flourished in the Unite ...

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 Ceres most commonly refers to: * Ceres (dwarf planet), the largest asteroid * Ceres (mythology), the Roman goddess of agriculture Ceres may also refer to: Places Brazil * Ceres, Goiás, Brazil * Ceres Microregion, in north-central Goiás ...

in reference to the exchange's heritage as a

commodity market A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investin ...

. ''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 v ...

was designated a

Chicago Landmark Chicago Landmark is a designation by the 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, economic, archite ...

. The building is now a

National Historic Landmark A National Historic Landmark (NHL) is a building, district, object, site, or structure that is officially recognized by the United States government for its outstanding historical significance. Only some 2,500 (~3%) of over 90,000 places listed ...

. 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 high-ris ...

s in the heart of Chicago's busy

Loop Loop or LOOP may refer to: Brands and enterprises * Loop (mobile), a Bulgarian virtual network operator and co-founder of Loop Live * Loop, clothing, a company founded by Carlos Vasquez in the 1990s and worn by Digable Planets * Loop Mobile, an ...

commercial neighborhood.

Trading platforms

The Pit

The pit is a raised

octagon In geometry, an octagon (from the Greek ὀκτάγωνον ''oktágōnon'', "eight angles") is an eight-sided polygon or 8-gon. A '' regular octagon'' has Schläfli symbol and can also be constructed as a quasiregular truncated square, t, whi ...

al structure where

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 ...

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

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 naturalist genre. His notable works include '' McTeague: A Story of San ...

. 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 established in the United States and the oldest stock exchange in the nation. The exchange is owned by Nasdaq, which acquired it in 2007 for $652 million, a ...

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

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

"creating the largest derivatives market ever."

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 Fortune may refer to: General * Fortuna or Fortune, the Roman goddess of luck * Luck * Wealth * Fortune, a prediction made in fortune-telling * Fortune, in a fortune cookie Arts and entertainment Film and television * ''The Fortune'' (1931 film) ...

'', 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
ref>
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