The Chicago Mercantile Exchange is one of the largest commodity exchanges

Chicago Mercantile Exchange - functions, structure and role of the Mercantile Exchange, official website of the Chicago Mercantile Exchange

Expand contents

Collapse content

Chicago Mercantile Exchange - definition

The Chicago Mercantile Exchange is one of the largest commodity exchanges in the world, is a non-profit corporation whose mission is to provide space for futures and options trading, collect and disseminate market information, maintain a clearing mechanism and monitor the implementation of trading rules.

The Chicago Mercantile Exchange is options market for futures contracts on agricultural products, metals and financial instruments.

Chicago Mercantile Exchange, founded in 1848 by a group of 82 enterprising grain merchants, - This the oldest and one of the largest futures trading exchanges in the world.

History of the Chicago Mercantile Exchange

The Chicago Board of Trade (CBOT), the oldest futures exchange in the world, was founded in Chicago on April 3, 1848. Initially, it was a large agricultural market where grain was sold and bought centrally. Exchange employees inspected the quality of the goods put up for sale and their compliance with the stated price category.

In 1864, the management of the exchange actually developed the concept of futures trading. A standard contract template was created under which a specified quantity of grain is bought and sold with a guarantee of future delivery, at a price set at a public auction at the time of the transaction. Until now, 80% of the world's grain futures trading volume passes through the CBOT exchange, on the trading floor of which more than 3,600 traders work simultaneously.

On April 7, 1986, the CBOT absorbed The MidAmerica Exchange. MidAm was founded in 1868 as Pudd's Exchange and incorporated in 1880 under the CBOT-like name Chicago Open Board of Trade. Trading at Pudd's Exchange took place outdoors on the corner of Washington and LaSalle streets. MidAm produced Many innovations were born without which the futures industry is now unthinkable: the concept of clearing by an independent third party was tested in 1882; margin collateral appeared in 1920; silver futures trading was organized for the first time (not counting New York) in 1968, and later for gold.

In 2002, CBOT, together with OneChicago, launched futures trading for individual stocks. In January 2003, the board of directors approved the introduction of LIFFE CONNECT technology, which significantly simplifies electronic trading. On April 16, CBOT and CME signed an agreement that CME will perform clearing and related procedures for all products listed on CBOT. The transition to a new electronic trading system and third-party clearing algorithm was completed on January 2, 2004.

On April 14, 2005, at a meeting of the board of directors, it was decided to restructure the exchange, transferring it to the status of a commercial joint-stock holding and a commercial member exchange organization. On October 19, as part of an IPO on the NYSE, 3.2 million shares of CBOT were offered at a price of $54.00 per share. On its first day of trading, shares jumped 49% to close at $80.50.

On October 17, 2006, CME and CBOT announced a merger and the creation of the CME Group exchange holding company. As a result of the merger, which was completed on July 12, 2007, all major asset classes became available for trading on a single trading platform. Currently, swap trading is actively developing on the exchange and block trading is underway - large-volume transactions concluded outside the market are being cleared.

Functions of the Chicago Mercantile Exchange

1. Organization of the raw materials market using the exchange mechanism:

First of all, the exchange provides demand for raw materials, which is not directly related to its use. Specifically, stock market demand and supply are carried out by stock market operators - stock speculators. Exchange trading provides the possibility that at existing prices there will be neither shortages nor overstocking;

It is not the product itself that is traded on the exchange, but the title of ownership of it or a contract for the supply of goods. A modern commodity exchange is a market for contracts for the supply of goods with relatively small amounts of actual supplies. The exchange, without connecting the movement of large masses of goods, equalizes supply and demand;

2. Identification and regulation of exchange prices.

The exchange participates in identifying and regulating prices for all types of exchange goods, concentrating supply and demand on the exchange, concluding a large number of transactions eliminates the influence of non-market factors on the price, making it as close as possible to real supply and demand. The exchange price is set through the process of quotation, which is considered the most important function of the exchange. Quotation refers to the fixation of prices on the stock exchange during each day of its operation, the registration of the exchange rate of a currency or securities, the price of exchange goods.

Price quotation is the registration of exchange prices according to exchange rules with their subsequent publication.

We will look at this function in more detail below.

This shows another component of market organization – price stabilization:

price fluctuations caused by the discrepancy between real demand and real supply are weakly elastic, are not repaid immediately, but rather are cumulative - the ability to turn into sharp price fluctuations. Exchange speculation is not a mechanism for inflating prices, but for stabilizing them;

An important factor in price stabilization is the transparency of the transaction, the public setting of prices at the beginning and end of the exchange day (exchange quotation), and the limitation of daily price fluctuations within the limits established by exchange rules. The information activities of exchanges are related to this.

3. Development of product standards, establishment of varieties acceptable to consumers and therefore having relative liquidity, registration of brands of companies admitted to exchange trading. The latter is especially important. This is a kind of qualification for the quality of products produced by the company. An important aspect of the exchange’s activities is the standardization of standard contracts, a kind of establishment of trading traditions.

4. Exchanges continue to perform their commodity distribution function, i.e. the function for which they originally arose - the purchase and sale of real goods.

5. By stabilizing prices for a limited list of raw materials and goods, exchanges also stabilize the costs of production of other, not just exchange-traded goods.

6. Stabilization of money circulation and credit facilitation.

The exchange increases the capacity of money circulation, because it represents the area of ​​maximum liquidity of goods. The exchange is one of the most important areas for applying loan capital, since it provides reliable collateral for loans and reduces risk to a minimum.

7. Settlement of all kinds of disputes and disagreements between the parties - arbitration activities.

In the process of exchange trading, due to a variety of reasons (error, attempt to deceive, etc.), there may be cases of controversial situations arising between exchange trading participants, which by their nature can be resolved directly only on the exchange and its corresponding neutral body. This is usually arbitration or arbitration.

8. Formation and functioning of the world market. A modern commodity exchange at this point combines the functioning of commodity, stock and currency exchanges.

9. Exchange insurance (hedging) of exchange trading participants against unfavorable price fluctuations. For this purpose, the exchange uses special types of transactions and mechanisms for their conclusion. Carrying out the task of insuring exchange trading participants, the exchange not only organizes trading, but services it. The exchange creates conditions so that buyers and sellers of real goods, if they wish, can simultaneously take part in the relevant exchange trading as clients or participants. This increases confidence in the exchange, attracts market speculators to it, increasing the number of traders both directly and through intermediaries.

10.Organization of exchange meetings for conducting transparent public trading, namely:

Organization of exchange trading;

Development of exchange trading rules;

Logistics support for bidding;

Qualified exchange staff

To organize trading, the exchange must first of all have a well-equipped “market place” (exchange hall), which could accommodate a sufficiently large number of sellers and buyers conducting open exchange trading. The use of modern electronic means of communication does not require the physical presence of traders in the hall, but allows trading through electronic computer terminals. But even in this case, the exchange is designed to provide a highly efficient electronic trading system.

The organization requires the exchange to develop and adhere to strict trading rules, i.e. norms and rules of conduct for bidders on the floor.

Logistics support for trading includes equipment for the exchange hall, workplaces for trading participants, computer software, etc.

11.Development of exchange contracts, which includes:

Standardization of requirements for the quality characteristics of exchange trading;

Standardization of consignment sizes;

Development of uniform requirements for settlements of exchange transactions.

The exchange sets strict requirements for those goods that are admitted to exchange trading. Based on these requirements, exchange standards are developed, which are taken into account by producers and consumers on commodity exchanges.

12. Guaranteeing the execution of transactions is achieved through exchange clearing and settlement systems. To do this, the exchange uses a system of non-cash payments by offsetting mutual claims and obligations of trading participants, and also organizes their execution.

13. Information activities of the exchange.

The most important functions of the exchange are the collection and registration of exchange prices with their subsequent compilation and publication, provision of information to clients, various other interested organizations, and the international market about the availability of goods based on samples and samples, usually based on established exchange standards, its publication in newspapers, magazines, information agencies.

Exchange members are individuals, although firms may be registered to transact through exchange members. For example, a firm can trade in its own name if two of the directors are members of the exchange and are registered on behalf of that firm.

Depending on the category of membership, an exchange member can trade all or certain types of goods. Accordingly, places on the stock exchange differ in value and number of votes. Generally, a full seat, which allows trading on all pits of the exchange, is more expensive and has a higher number of votes compared to a "limited action space" seat. The main categories of membership on the exchange are as follows: FULL, AM, GIM, COM, IDEM and CRCE. Belonging to one or another category of membership can be determined by one of the plates attached to the working jacket of an exchange member during trading.

The activities of the CTB are controlled and regulated by the Chicago Trading Association, which develops the rules and conditions of trading on the exchange. The Association operates under the leadership of the Exchange Board of Directors, consisting of 24 members.

Every working day, several hundred exchange members gather on the trading floor of the exchange to make transactions. Futures trading takes place in so-called “pits” reserved for individual commodities. The most active “pits” are reserved for trading in soybeans, wheat, corn, oats, soybean oil and flour.

Each “pit” is a series of steps leading down to the sales floor level. The top rung is occupied by exchange employees, whose duties include monitoring changes in prices on the exchange and transmitting this information to the quotation center, which reports this data to the exchange. With later months of supply of goods, traders are located on the low steps, and with loved ones - on the top, closer to the telephones.

Offers on the stock exchange are made using the open outcry method, accompanied by hand signals. Transactions concluded in the “pits” must be reconciled by the parties within 15 minutes.

Sources of the article The Chicago Mercantile Exchange is

ru.wikipedia.org - free encyclopedia Wikipedia

dic.academic.ru - encyclopedic dictionary of economics and law

futures101.ru - Blog about futures and derivatives market

refine.org.ua - educational center

odiplom.ru - information site

forex2.info - analytical site about Forex

finchart.ru - website for online traders

trading-study.com - site for online traders

forum4trader.com - forum for traders

abforex.ru - AB Forex Company - website for online traders

youtube.com - video hosting

images.yandex.ua - Yandex pictures

And, as well as the global symbol of the financial industry - Wall Street. But in the USA there is another, no less significant exchange center - Chicago. It is in Chicago that the main center of futures trading is located - the CME exchange (Chicago Mercantile Exchange - Chicago Mercantile Exchange), on which the most liquid (globally) and both settlement (for example, futures for) and delivery (futures for WTI oil) are traded. character. In this article we will talk about the CME exchange - what it is and what opportunities it provides for investors.

History of the Chicago Mercantile Exchange CME

In the United States, the 19th century was marked by the emergence of the NYSE (in 1817) and the CME (in 1871), and was also remembered for the active construction of railroads. Chicago at that time was a major railroad center that connected farmers in the central states and large cities in the eastern United States. A special role in the relationship between Chicago and New York was played by the Erie Canal, which served as a driver for the development of Chicago as a center for trading agricultural assets. As a result of the development of this relationship in Chicago, there is an active opening of warehouses and the emergence of many commodity exchanges specializing in certain types of agricultural products.

Actually, the CME exchange in its current form is an association of the largest commodity exchanges of that time. Initially, in Chicago in 1848, the CBOT (Chicago Board of Trade - Chicago Chamber of Commerce) exchange appeared, on which grain and soybeans, as well as their processed products, were traded. And a little later, in 1874, the CPE exchange appeared, on which eggs and butter were traded. Moreover, after the Civil War, the Chicago Butter and Egg Board exchange was separated from the CPE into a separate structure, which in 1919 was renamed CME and served as the basis for the creation of the current CME Group exchange.

Some time later, commodity exchanges began to appear in New York. One of the most significant exchanges of this kind is considered to be NYMEX (New York Mercantile Exchange), founded in 1882, on which WTI oil is traded. Moreover, NYMEX in 1994 absorbed another commodity exchange, COMEX (Commodity Exchange of New York), formed in 1933, on which futures contracts for metals were traded.

CME was renamed CME Group after the exchange listed its shares on the NYSE in 2002 on the New York Stock Exchange. During the IPO, the now CME Group raised $191 million. Another significant event was the merger of the CME and SWOT exchanges in 2007. In 2008, NYMEX (which in turn belongs to COMEX) joined the CME Group. The next step is to join this conglomerate of exchanges with the Kansas KCBT exchange, which specialized in wheat trading. Next, CME Group, to ensure the stability of electronic trading, develops a global network of offices across the planet, and then opens a representative office in Europe - CME Clearing Europe. CME Group is also creating its own “command center” in the USA - CME Global Command Center. Thus, the CME Group was formed, which became the result of the consolidation of commodity exchanges and covered the whole world with electronic trading.

It is worth noting that this “worldwide coverage” was made possible thanks to the launch of the Globex platform on the CME in 1992, which allows trading on weekdays around the clock with a break of only one hour. Thanks to this schedule, traders from different time zones of the planet can participate in trading. In addition, one cannot fail to note a number of futures that have gained enormous worldwide popularity - these are futures on currencies and stock indices (in particular, the S&P500 index), as well as their mini-versions.

Chicago Exchange CME Group is currently

Today, CME trades futures and options contracts on crops, energy, stock indices, currency pairs, interest rates, metals, weather and real estate in the most developed regions of the United States, as well as related options and over-the-counter market assets.

Rice. 1. Asset groups on CME

On average, CME trades about 15 million volumes of futures and options contracts per day across all assets (10 million futures contracts and 4 million options). The total number of open positions in futures and options is over 100 million.

Rice. 2. Trading volume on CME

Nowadays, trades on CME can also be made from the trading floor (open outcry), which is located in the CBOT office in Chicago. The turnover of transactions completed in this way exceeds 1 million contracts.

If we consider the specification of a futures contract on the euro (one of the most liquid currency futures), we can see that its size is equal to 125,000 euros, the price step is 0.0005, the cost is $6.25, the size of the GO for opening a position on this futures is 2750 $. But E-mini contracts are also traded on CME (represented for the most liquid contracts of all asset groups), the size of the GO for which is two times smaller and amounts to $1,375 for a euro contract (size - 62,500 euros, price step - 0.0001, cost price step - $6.25) and E-micro contracts, the size of the GO for which is 10 times less than the base futures - $275 for a contract on the euro (size - 12500 euros, price step - 0.0001, price step cost - 1, $25), which allows all groups of traders to trade similar contracts.

Rice. 3. Euro futures specification on CME

Conclusion

Trading on CME allows you to implement various strategies, since liquidity practically tends to its absolute value, and the number of assets traded is very large. Moreover, contracts have been implemented for both large participants and smaller traders (mini- and micro-contracts).

The Chicago Mercantile Exchange is now the largest commodity exchange in the world, as well as one of the very first non-profit companies involved in trading futures and options contracts. The organization of trading with the implementation of both local transactions and transactions through an electronic trading system made it possible to achieve impressive liquidity for all provided instruments. The CME plays a key role in the development of the international derivatives market, as well as an effective role in commodity distribution, price stabilization and economic development not only in the United States but throughout the world.

year of foundation

million transactions are made per day

deals are still concluded “live”

24-hour operation, the assistance of a clearing house, as well as an extensive list of a wide variety of instruments have made the CME exchange an undeniable leader in its field. A huge number of investors, traders, as well as producers and suppliers of raw materials carry out a key part of their activities on CME platforms. The long-term history of the exchange has repeatedly proven that CME is able to effectively adapt to surrounding changes and is one of the first to introduce the latest technologies for transactions, risk management and settlement and delivery activities, which has become a key factor in such a long existence of the exchange, and most importantly, its constant rapid development .

History of the CME Exchange

The history of the largest futures market, the CME, is based on two previously separate exchange platforms, which later merged to form the CME we know today. In 1848, enterprising grain traders united in Chicago to effectively distribute their produce around the world. The city of Chicago, like New York, facilitated such activity due to its extensive railroad infrastructure and shipping hub across Lake Michigan. Initially, the association created was a large open agricultural market, which was managed by a group of innovators and accordingly supported by their efforts. Various types of grain were sold at the site, in particular wheat, oats and corn, and the organizers inspected the quality of the products and monitored the fulfillment of their duties by sellers and buyers. This exchange platform was named Chicago Board of Trade (CBOT). In 1864, the participants and management of the exchange created the basic concept of the derivatives market - futures contracts. They regulated a special document that made it possible to sell or buy a specified quantity of products at a fixed price with a guarantee of execution of the transaction after some time. Amid the rapid success of the CBOT, other commodity and commodity exchanges began to appear in Chicago. In 1874, an exchange selling eggs and butter was organized, which was initially called the Chicago Produce Exchange, but during various restructurings, later, in 1898, it became an independent exchange called the Chicago Butter and Egg Board, which fully corresponded to its scope activities. It is this exchange platform that is now considered the founder of the modern CME, since the Chicago Butter and Egg Exchange received its current name in 1919, when managers realized that it was quite difficult to operate on such a narrow range of goods. After expanding the functionality of the exchange, the first trading on onions and potatoes took place on the CME, and later this exchange was already actively trading pork, turkey, cheese, milk and other products.

By the mid-twentieth century, the CME exchange faced serious problems, due to which it was on the verge of closure. Agricultural activity was developing, and all the necessary goods could be purchased nearby from private farmers or companies, so the need for exchange trading of products decreased, and accordingly, liquidity on the exchange approached zero. The salvation for the exchange was the introduction of futures contracts for live cattle and frozen bacon, which could not be easily purchased because they required significant costs - warehousing and cultivation. Thanks to this innovation, the CME exchange was once again operating at full capacity, as evidenced by a significant increase in the membership fee. In the early 70s, CME received another major breakthrough in the financial sector, thanks to its entry into the foreign exchange trading market. In 1972, the management of the exchange decided to create a separate section of the International Monetary Market (IMM), within which the first currency futures were provided, which was immediately accepted by the financial market with great demand. This fateful decision and the abandonment of the traditional activities of the CME exchange platform gave a huge impetus for further development. Thus, in 1980, the first futures for the difference in interest rates on the Eurodollar currency was introduced, as well as futures for the most popular stock index S&P500, which led to a real boom in stock trading.

The S&P 500 index is the most famous index of the Standard & Poor's company, rivals in popularity the Dow Jones index and is often called the S&P 500 (or SPX for short) barometer of the American economy.

At the same time, the CBOT commodity exchange also did not stand still and in 1986 absorbed the MidAmerican Exchange, within which very relevant and promising projects were concentrated, such as margin deposits, the concept of clearing and trading in precious metals.

Do you want to make money on shares of super companies such as Google, Apple, MicroSoft, FaceBook? Invest in them with the most reliable stock broker – .

Technological breakthrough in stock trading

The end of the twentieth and beginning of the twenty-first century brought a strong technological push to almost all areas, and the stock exchange was no exception. Innovations in the field of electronic computing technologies have also contributed to stock trading. The CME was one of the first exchanges to introduce an electronic trading system. The introduction of such a system into operation began to be mentioned back in 1987, but this news was initially received with skepticism by exchange participants. In 1992, CME refined its electronic network and launched it under the name CME Globex. Subsequently, this platform was further refined in 1998. The introduction of a trading and analytical platform also contributed to the active development of the exchange, since at the same time there was an active demand for home computers and now traders could make transactions directly from home. In turn, this significantly expanded the accessibility and loyalty of ordinary people to the exchange platform. The popularity of the exchange grew every day, and the decision to carry out 24-hour trading through Globex was another additional factor in the success of the CME. Now stockbrokers from all over the world could carry out transactions, right from their home and at any convenient time.

Public offering of shares

In the early 2000s, the management of the CME company decided to reach a new level and make the exchange a commercial structure by placing shares into free circulation. At the end of 2002, CME went through an IPO and placed $191 million worth of its own shares, thereby becoming the first exchange to list its shares on the exchange. On the first day of trading, CME shares rose almost 50%, and to this day are actively traded on the New York Stock Exchange. The funds raised during the public offering of shares were used to expand the markets, technologies and sphere of influence of the company. In particular, most of the money was spent on improving the electronic network and the quality of computing servers.

Merger stages

The next step in the development of the Chicago Mercantile Exchange was the merger with other trading participants, which can also be assessed as a fairly expedient and correct move. In 2007, the official process of merging the CME and CBOT exchange platforms took place, which led to the formation of the CME Group, under the name of which the exchanges continue to exist to this day. Later, in mid-2008, the New York exchanges NYMEX and COMEX joined the holding.

Modern features of CME Group

The policy of mergers and mutual cooperation not only with exchanges, but also with rating agencies, clearing houses, brokerage houses and other financial institutions, has led to the fact that CME has become the leader in the global derivatives market in just a few years. Thus, at the moment, CME Group controls an impressive share of the futures market, providing high liquidity for all instruments and the best conditions for all trading participants. The turnover and capitalization of the exchange increases annually; during the last reporting quarter, more than 750 million transactions in futures and options took place on the CME.

Operation

Currently, the CME exchange operates as an open trading market, by protest, and also as an electronic chamber of commerce. In other words, on the CME to this day, participants continue to trade in the so-called exchange pit, carrying out their transactions with shouts and gestures. More than 80% of trading, and most importantly around the clock, transactions take place on the Globex electronic platform.

Tools

The CME Group listing list features a huge variety of futures and options contracts. All derivatives presented on the exchange are divided into several categories:

• goods (dairy and livestock products, agricultural products, cocoa, coffee, etc.);
• interest rates (Central Bank rates, Eurodollar rates, etc.);
• currencies (euro, yuan, yen, Australian dollar, Canadian dollar, etc.);
• stock indices (S&P500, Nasdaq, DowJones, Nikkei, etc.)
• precious metals (gold, silver, platinum, etc.)
• energy resources (oil, coal, gas and others).

In addition to the main categories, exotic futures are also traded on the CME - for weather conditions, for changes in real estate prices, etc. The Chicago Mercantile Exchange CME currently provides not only the possibility of speculative turnover in futures transactions, but is also an effective stabilizer of prices for world goods and resources, provides the ability to control supply and demand around the world, as well as carry out transactions with real delivery for interested buyers and suppliers products.

But in the EXANTE terminal, among the 50+ available markets, there are also sites of another type, for example, the largest commodity exchange - the Chicago Mercantile Exchange (CME). What is its difference from the stock exchange and why might it be of interest to an investor?

On stock exchanges, the main assets are shares and some other securities - bonds, shares of funds. Examples of such exchanges: New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange (LSE).

On commodity exchanges, the main assets are exchange-traded goods (natural resources, agricultural products) and derivatives on them (futures, exchange options). Often such exchanges also trade derivatives on currencies and stock indices. Examples of commodity exchanges: Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX), LIFFE.

There are also mixed exchanges where trading of all types of assets is presented. An example of such an exchange is the Moscow Exchange.

CME's place in the global economy

CME is the world's number one commodity exchange. Unlike stock exchanges, it cannot be assessed by parameters such as total capitalization or the number of companies. But you can estimate the trading volume, and it is huge. The CME's monthly trading volume exceeds $2T (trillion), more than any stock exchange. In addition, it is a commodity exchange with the widest range of assets.

Legally, CME is part of the CME Group, a conglomerate that, in addition to CME, includes NYMEX (New York Mercantile Exchange), CBOT (Chicago Board of Trade) and a number of smaller exchanges. NYMEX, although inferior to CME in terms of trading volume and assortment, is a leader in trading such a strategic resource as oil. As a result, the CME Group is a truly formidable organization that leads the world in trading a variety of assets, from index and currency derivatives to agricultural commodities and energy. In the commodities market, CME Group occupies a position similar to that of NYSE Euronext in the stock market. However, today we will talk about only one member of this conglomerate – CME itself.

The CME building is true to the familiar Chicago style of business development. Strict vertical lines, strict monetary capitalism, no New York tiers or nods to antiquity. In the background on the right is the Willis Tower, the tallest skyscraper in the United States, which was also the world record holder from 1973 to 1998.

Story

The CME was founded in 1874 to trade agricultural products and was first called the Chicago Butter and Egg Board. Due to the specifics of these goods (they cannot always be delivered quickly), from the very beginning of the exchange, a significant part of the transactions were not instant purchases of goods (spots), but futures on them. In the 1960s, the range of contracts on the exchange expanded: for the first time in the world, futures for frozen pork and live cattle began to be traded. But the real revolution came in the 1970s and 1980s, when the CME introduced futures and options on national currencies (such as the dollar and yen) and stock indices (such as the S&P 500).

As a result, the exchange ceased to be purely a commodity exchange in the classical sense, also affecting the foreign exchange and stock markets (through derivatives). The exchange has become popular not only among classic commodity traders, but also among speculators who make money on changes in the prices of a wide range of assets from grain to currencies. However, the CME still maintains a significant emphasis on agricultural products.

Why is a commodity trading exchange interesting for an online trader?

Unlike stock exchanges, where there is a thin line between “investors” and “speculators” (there is a circulation of all kinds of “papers”), commodity exchanges, by original design, are more “real” and less “speculative”. Their main purpose is to meet the urgent needs of enterprises and entire countries for raw materials, energy and food. The stock can be resold immediately or many years after purchase. But it is difficult to resell a barrel of oil or a carload of grain. Once received, the consumer usually uses them for their intended purpose. Therefore, for most online traders, unless they represent businesses, there is no point in literally buying commodities. But they may be interested in derivatives for these commodities - futures and options. They can be resold in the same way as any securities. In addition, they are not only for oil or grain, but also for other assets.

The legendary "futures pit" on the Chicago Mercantile Exchange. After 165 years of operation, the trading floor was closed, and since mid-2015 all trading has been carried out electronically.

Trading futures and options carries greater risks than trading stocks, but the rewards can be quick. As a rule, successful trading of these assets requires greater professionalism of the trader and better ability to assess risks. Trading futures and options is contraindicated for those who treat the market as a casino and simply hope for luck. Such a trader immediately finds himself at a disadvantage in front of professionals who use mathematical methods to assess the profitability of investments.

And of course, when trading derivatives on exchange commodities, it is worth remembering their original purpose, otherwise unpleasant oddities are possible. If you do not need a tank of grain in your yard, then you must resell the futures in time before delivery, or make sure that it is non-deliverable. More information about deliverable and non-deliverable futures and options, as well as other features of these assets, can be read on Wikipedia (futures, options).

Popular assets on CME

The most popular futures on the CME (and in general in the world) in terms of funds turnover is futures on the euro-dollar pair (EUR/USD). There are 186,000 of these contracts traded per day on the CME, totaling $25B (billions). Plus, there are 33,000 options on the same pair. The total monthly turnover for these instruments is more than $700B per month, that is, a significant part of the turnover of the entire exchange. In second place by a small margin is the yen-dollar pair (JPY/USD): 132,000 futures and 16,000 options per day, more than $500B per month.

By the number of contracts (but not by the turnover of funds), futures and options on the S&P 500 index are the leaders on the CME. More than 2M (million) futures and options are traded on it per day, the monthly turnover of funds is about $3B.

Among agricultural products, corn is the leader. About 600,000 contracts are concluded per day for a volume of about 3B bushels (100M cubic meters). This is 3 cubic kilometers (!) per month, worth about $5B. And per year - 40 cubic kilometers. However, most of this volume is virtual: it is the resale of contracts between traders. If all these cubic kilometers of corn were actually supplied to consumers, this would greatly exceed the capacity of its global production.

Wheat, which is considered the number one agricultural crop in Russia, lags significantly behind on the CME: it is sold three times less (both in terms of money and volume): “only” one cubic kilometer per month, or more than 10 cubic kilometers per year. This is again a virtual figure: the real world wheat harvest is less than 1 cubic kilometer (about 1B tons). However, if you put in a line even those grains that actually reach the consumer, you will still get an astronomical length of a couple of tens of billions of kilometers - greater than the diameter of Pluto’s orbit.

CME and online brokers

Most major online brokers give clients access to CME. However, working with derivatives is technically more complex than working with stocks. Some well-known terminals do not support options trading at all, and brokers suggest using the QUIK terminal to trade this type of asset. Most of them have a separate Option Board module (Option Trader, etc.), but it is not always conveniently implemented. An example of a simple and convenient implementation of options trading is the options board in the EXANTE trading terminal.

Another complication is that many brokers require separate accounts to trade stocks and derivatives. This is typical for American brokers such as Interactive Brokers. But European brokers such as EXANTE usually allow you to trade all types of instruments from one account.

Commissions when working with CME and other commodity exchanges can vary radically between different brokers: from several rubles to several dollars per contract. EXANTE has a maximum commission of $1.5 per futures or option on CME (but it can be lower if there is high turnover).

Chicago Mercantile Exchange (Chicago Mercantile Exchange, CME) today ranks first in the world rankings of pure competition wholesale markets. Located in the third most populous city in the United States, Chicago. Merged with the Chicago Board of Trade and the New York Exchange NYMEX forms . ( Chicago Mercantile Exchange Group) is the first largest futures market in North America.

The actual owner of the Chicago Stock Exchange, covering the entire planet with electronic trading. The headquarters is located in a 1930s skyscraper in the city's bustling business district known as Chicago Loop, among the headquarters of key US companies. The closest neighbor is a branch of the Federal Reserve Bank.

The official website of the Chicago Mercantile Exchange is http://www.cmegroup.com/

The Chicago Stock Exchange has a high level of diversification: the variety of types of trading instruments is great. Popular options and futures contracts include:

• currencies of different countries ( EUR, AUD, CAD, JPY, CNY and others);
• agricultural and livestock products;
• energy resources (gas, oil and others);
• interest rates (Central Bank, Eurodollar and others);
• indices of leading stock exchanges such as or;
• real estate;
• precious metals;
• the cost of American real estate in the most prestigious areas;
• options and assets of the over-the-counter market and even the weather.

Total trading on the Chicago Mercantile Exchange today reaches a volume of 524.2 million contracts. In addition, trading is conducted on weekdays on a separate, almost 24-hour ( 23 hours of work and 1 hour of break), platform Globex.

The trading volume here reaches 326.7 million contracts per month.

In one day within the CME, trading volume reaches 15 million contracts across all assets: two thirds are futures, the rest are options. Open positions for both total more than 100 million. A million contracts a day are traded directly from the trading floor in Chicago. At the same time, the Chicago Mercantile Exchange website contains a lot of useful tools, including everything you need for independent futures trading online.

398 West Arcade Place, Chicago, Illinois

Chicago Mercantile Exchange opening hours

In the CME Group markets, trading is carried out 24/7 thanks to the electronic trading and analytical platform Globex working via the Internet. The American dollar is accepted as the currency for settlements and prices ( USD). Transaction costs are also charged exclusively in USD.

History of the formation of the exchange

The Chicago Mercantile Exchange owes its existence to the open in 1825 Erie water canal, along which the movement of cargo ships was organized. From that moment on, the movement of goods from the center of the country to the East Coast of the United States was greatly simplified, which gave impetus to the development of Chicago, an important railway hub.

The city has become a center for the development of markets for agricultural crops, livestock products and timber. Due to poor road conditions, warehouses grew around Chicago, and the grain market was destined to become a futures exchange in the future. The city acquired the largest grain storage facility in the United States.

• 1848- an association of grain traders in an open agricultural market led by a group of innovators, which later became the Chicago Board of Trade or CBOT (Chicago Board of Trade).

Birth of a concept

Corn, wheat, and oats were sold at the CBOT site. The quality of products and performance of duties on the part of both sellers and buyers was under the strict supervision of market organizers.

• 1864- the emergence of futures contracts, which became the main concept of the derivatives market. Their essence boiled down to the regulation of a special document that made it possible to sell or purchase a specific volume of goods at a fixed price with a guarantee of execution of the transaction after some time.

Emergence of CME

After the creation of the CBOT in 1848, other exchange platforms began to appear in Chicago, focusing on the purchase and sale of agricultural goods.

• 1874- opening of the stock exchange CPE (Chicago Produce Exchange), within which trade in butter and eggs was carried out.
• 1895- creation of an exchange Produce Exchange and Egg Board, as part of CPE, but focused on pricing transparency.
• 1898 year- separation of Produce Exchange and Egg Board from CPE and renaming to Chicago Butter and Egg Board (CBEB).
• 1919- The Chicago Mercantile Exchange begins its history under its current name. CBEB was renamed CME and took a step towards expanding the range of trading instruments. In the same year, the line of contracts on the exchange platform was replenished with onion and potato futures.

On the brink of collapse and salvation

It's hard to believe, but the Chicago Mercantile Exchange (CME) was on the verge of closure in the mid-20th century. The organization experienced failure after failure. Attempts to introduce new products did not lead to a sufficient increase in trade, while demand for butter, potatoes and eggs fell. The latter have ceased to be a seasonal product due to new technologies and futures on them have lost their former popularity. Due to Congress' ban on the sale of onion derivatives, trading on the Chicago Mercantile Exchange fell even lower.

• 1960s- drop in exchange activity to almost zero.
• 1966- the emergence of frozen pork futures for bacon and futures contracts for live cattle. This made it possible to increase activity on the CME trading floors and the demand for the exchange among sellers and buyers began to grow again.
• 1968- the cost of membership on the exchange costs $38,000. For comparison, in 1964 this figure was $3,000.

Introduction of new tools

• 1970s- The Chicago Mercantile Exchange CME entered the foreign exchange market for the first time.
• 1972- section opening International Monetary Market(IMM), which became the first financial futures market on the planet. Active trading in base currencies began immediately, and the expansion of the exchange towards financial instruments gave an unprecedented impetus to the development of the CME.
• 1980s- introduction of futures contracts on the Eurodollar rate, based on LIBOR, as well as on . The concept of mini-contracts was developed, followed by the launch of e-mini S&P 500 and e-mini Nasdaq 100 futures. Thanks to these steps, the Chicago Mercantile Exchange experienced unprecedented growth.

Period of technological innovation

The 90s and early 2000s were a time of technological development in all areas, which also affected commodity exchanges. The widespread introduction of computers, the development of the Internet and mobile communications - all this has made a significant contribution to stock trading, especially the emergence of an electronic trading system. The current CME Group, the Chicago Mercantile Exchange, then became one of the first to introduce a fundamentally new tool into its work.

• 1987- the first proposals to introduce an electronic trading system and skepticism about this on the part of exchange participants.
• 1992- launch of our own electronic network CME Globex.
• 1998- further refinement and improvement of the Globex electronic trading platform.

It was in the late 90s that the demand for home computers experienced its boom.

Thanks to the emergence of a trading and analytical platform CME Globex traders were able to trade directly from home.

This became a new stage in the active development of the Chicago Mercantile Exchange: it began to interest ordinary people. By making Globex open 24 hours a day, CME was able to attract traders from all over the world.

Today, the Chicago Mercantile Exchange, whose official website offers trading tools and a lot of information on the organization’s work, conducts the bulk of transactions via the Internet.

Becoming a commercial entity

The beginning of the 2000s was marked by the decision of the CME management to turn the exchange into a commercial structure. To do this, it was necessary to send the company's shares into free circulation.

• 2002- the exchange has undergone a procedure ( first public offering) and placed its shares in the total amount $191 000 000 . For the first time in history, the exchange listed shares on the exchange. On the first day of trading, their price increased one and a half times. The funds raised were used to improve the work of CME.

Mergers with other market participants

• 2007- merger of CME and CBOT, formation of the CME Group holding.
• 2008- joining the CME Group of the New York Stock Exchanges COMEX And NYMEX.

Consolidation with other major trading participants from Chicago and New York was an appropriate step in the evolution of the Chicago Mercantile Exchange.

Exchange functions

Currently, the CME Group Chicago Mercantile Exchange operates in two modes:

• open trading market;
• like an electronic chamber of commerce.

In the first case, just like decades ago, exchange participants make their transactions through protest and with shouts and bright gestures. This traditional exchange pit covers no more than 20% of trading today. The remaining 80% comes from Globex- online trading. The main advantage of working with CME over, for example, is the centralization of all operations: market manipulation is simply impossible.

It is important to note that due to its importance, the Chicago Exchange not only organizes the turnover of futures transactions, but also has a great influence on world prices of various goods and resources. CME is one of the price stabilizers and controller of supply and demand throughout the planet.

In addition to these basic functions, the exchange allows transactions with real delivery, if suppliers and buyers are interested in it.

List of the most liquid CME futures:

• ES- S&P500 e-mini provides the exchange with up to 1.6 million contracts per day.
• ZN- for 10-year Treasury bonds ( with a maturity of 10 years)
• C.L.- a futures contract for crude oil, traded on the NYMEX exchange and is the most popular among commodities.
• ZF- 5-year Treasury bond futures
• ZT- for 2-year treasury bonds
• ZB- 30-year Treasury bond futures, traded since 1977.
• G.C.- a contract for gold, which is second only to crude oil in demand among commodity futures.
• 6E- Euro (EUR) contract, the most popular among CME currency futures.
• 6J- a contract for the Japanese yen (JPY), which is one of the world's reserve currencies. This futures is the second most popular in the list of foreign exchange.

Assets of the Chicago Mercantile Exchange

There are 4 types of assets available for trading on the Chicago Mercantile Exchange:

1. Traditional commodity contracts are mainly for dairy products or livestock products.
2. Interest rates (for example, euro-dollar).
3. Stock indices.
4. Currencies of ten leading countries in the world.

The Chicago-based CME Group trades approximately thirty options and approximately 50 futures on world currencies. Among contracts for agricultural products, corn is the leader - up to 600 thousand contracts per day of trading. Wheat is 3 times behind it. Quite a few Forex traders flock to the CME. Among them, currency mini-contracts are especially in demand due to their minimal costs and small volumes.

In addition to mini-contracts, futures for world currencies are also represented by the currencies of the G10 countries and the currencies of developing countries. The total number of transactions on IMM is up to $100 billion per day. For the most part, these transactions involve the dollar, euro, British pound and Japanese yen, but sometimes the Russian ruble. The modern official website of the Chicago Mercantile Exchange is available in many languages, but, alas, does not have a Russian version.

Chicago Mercantile Exchange today

CME Group is a holding company, the history of which includes periods of decline and rapid growth, mergers and acquisitions. Today, CME shares are actively traded on the New York Stock Exchange, and the CME Group holdings include:

1. CME (Chicago Mercantile Exchange)
2. CBOT (Chicago Futures Exchange)
3. NYMEX (New York Mercantile Exchange)
4. COMEX (division of NYMEX, focused on metals trading)

The best brokers for investing in shares

• FinmaxFX
• eToro
• Libertex