Chicago Mercantile Exchange
From Wikipedia, the free encyclopedia
| Chicago Mercantile Exchange | |
| Type | Public (NYSE: CME) |
|---|---|
| Founded | 1898 |
| Headquarters | Chicago, Illinois |
| Key people | Terrence A. Duffy, Chairman Craig S. Donohue, CEO Phupinder Gill, President & COO Leo Melamed, Chairman Emeritus |
| Industry | Business Services |
| Products | Options/Futures exchange |
| Revenue | $1.09 billion USD (2006) |
| Website | www.cme.com |
The Chicago Mercantile Exchange (CME or, simply, "The Merc") (NYSE: CME) is an American financial exchange based in Chicago. 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. The Chief Executive Officer of the Merc is Craig S. Donohue.
CME trades several types of financial instruments: interest rates, equities, currencies, and commodities. It also offers trading in exotic instruments 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.
Contents |
[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).
To connect to Globex, traders connect via Market Data Protocol (MDP) and iLink 2.0 for order routing.
[edit] Merger
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.[1]
[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.
