Chicago Mercantile Exchange

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The Chicago Mercantile Exchange (CME or, simply, "The Merc") (NYSE:CME) is the largest and most diverse financial exchange in the United States. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a not-for-profit organization. The exchange demutualized in November 2000, and went public in December 2002, becoming the first US exchange to do so. The Chief Executive Officer of the Merc is Craig S. Donohue. The Merc is located in Chicago.

CME trades in several asset classes: interest rates, equities, currencies, and commodities. It also offers trading in exotic classes such as weather and real estate derivatives.

CME has the largest options and futures contracts open interest (number of contracts outstanding) of any futures exchange in the world, which indicates a very high liquidity. This is vital to the success of any stock or futures exchange.

1 Trading Methods
- 1.1 Open Outcry
- 1.2 CME Globex®
2 News
3 References
4 Notes
5 See also
6 External links

[edit] Trading Methods

Trading is conducted in two methods; an open outcry format and the CME Globex® electronic trading platform. Approximately 70 percent of total volume at the exchange occurs on CME Globex.

[edit] Open Outcry

The open outcry method consists of floor traders standing in a trading pit to call out orders, prices, and quantities of a particular commodity. Different colored jackets are worn by the traders to indicate their function on the floor (traders, runners, CME employees, etc.). In addition, complex hand signals (Called Arb) are used. These hand signals were first used in the 1970s. The pits are areas of the floor that are lowered to facilitate communication, sort of like a miniature 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.

[edit] CME Globex®

Today the CME Globex trading system operates at the heart of CME. It was introduced in 1992 as the first global electronic trading platform for futures contracts. 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 Globex was first launched, it used Reuters' technology and network. 2002 saw the launch of the second generation of Globex using a modified version of the NSC trading system, developed by Paris Bourse for the MATIF (now Euronext).

[edit] News

On October 17, 2006, the Chicago Mercantile Exchange announced the purchase of the Chicago Board of Trade for $8 billion in stock, rejoining the two financial institutions as CME Group, Inc. CBOT currently uses outsourced technology platforms, but will move 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.<ref>CME news release October 17, 2006.</ref>

[edit] 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. ISBN 10: 3-939533-05-X.