Chicago Mercantile Exchange it is one of the greatest financial exchanges in the world, which deals with trading options and futures. When in 2007 there was a merger with the second stock exchange from the same city, i.e. Chicago Board of Trade (CBOT), the CME group was founded. Thanks to this merger, the value of the entire CME group has quadrupled in two years. Currently, the group’s market capitalization is $ 30 billion.

Now let’s look at how from a non-profit organization dealing with butter and eggs, that is, agricultural commodities. It became a huge financial stock exchange.

The history of the Chicago Mercantile Exchange – the most important events

It all started in 1898 when the CME was founded. Then the Chicago stock exchange took the name of the Chicago Butter and Egg Board and was founded as a non-profit organization. As the name suggests, it has been trading in agricultural products from the very beginning. It adopted its present name in 1919.

The first breakthrough for CME was 1972. It was then that CME was the first stock exchange to introduce the first currency futures contracts to trading.

In 1981 and 1982, Eurodollar futures were first introduced. A year later, the first options on futures contracts in the world.

A major event at the turn of the century was the change in the legal form of the stock exchange. In 2000, the stock exchange was demutualized as the first and became a company. In this way, Chicago Merc became a profit-driven, shareholder-owned corporation.

The next modern history of CME concerns a merger with other stock exchanges and the creation of the CME Group.

How was the CME group formed?

CME Gruop was established along with the merger of two Chicago exchanges. The Chicago Mercantile Exchange merged with the Chicago Board of Trade in July 2007.

A year later, in August 2008, another merger took place. Two other stock exchanges joined the already existing CME group. These were two New York Stock Exchanges: New York Mercantile Exchange (NYMEX) and Commodity Exchange, Inc. (COMEX). While NYMEX and COMEX have been linked since 1994, the futures contracts on these exchanges are listed separately.

What did joining the CME Groupe of the New York Stock Exchange, NYMEX Holdings?

Thanks to this merger, apart from futures contracts related to agriculture, also other raw materials on which the contracts are based have been added. Accordingly, this merger allowed for a significant increase in the volume of capitalization. This made CME the largest US stock exchange.

What divisions make up NYMEX Holdings?

NYMEX – is an exchange that handles transactions related to energy contract markets, i.e. crude oil and energy carriers.

COMEX – is a branch responsible for trading contracts for metals, i.e. primarily gold, silver and copper.

General information about the CME exchange

Full name Chicago Mercantile Exchange
Shortcut CME
Stock exchange headquarters CME Center building, 20 South Wacker Drive, Chicago, Illinois
Company owner CME Group
Stock market products Futures (futures and options)
date of creation 1898

What quotes can we find on the Chicago Mercantile Exchange?

The Chicago Merc Stock Exchange is where futures and options are traded. Due to its size and variety, we can find very diverse base products.

It is impossible to start with a product that has been associated with Merc from the very beginning. It is, of course, about agricultural products. The contracts for agricultural goods include:

  • soybeans,
  • cereals (e.g. wheat),
  • cattle,
  • animal products (e.g. milk, cheese or butter),
  • oil seeds,
  • lumber of different lengths.

Energy-related products are another big commodity. Mainly crude oil, gasoline or gas.

Various types of metals must also be present. Therefore, the futures contracts for metal products that can be found on CME are:

Interest rate contracts (including Eurodollar) are also available. And also bonds and financial currency futures. In addition to the euro or the Japanese yen, we also find futures on G10 or emerging markets currencies.

Cryptocurrencies are a novelty on the Chicago exchange. In December 2017, the Chicago Mercantile Exchange was launched Bitcoin futures trading. However, from February 2021, CME launched trading in Ether futures.

Chicago Merc is the only exchange in the world that allows you to trade weather derivatives. The first options for climatic conditions were introduced in 1999. The available weather products include forecasts:

  • temperature,
  • snow,
  • rain
  • hurricanes.

What are futures contracts?

Futures contracts were created to minimize price fluctuations in the market. It’s just a contract between one party and the other, that is, between the seller and the buyer. The parties agree on the date and price at which the settlement will take place, i.e. the sale of the underlying instrument (e.g. securities, precious metals, etc.)

What are the options?

An option, like a futures contract, is a contract between an option writer and a buyer for a specific fee, also known as a premium. Only in this case is the right to carry out the transaction (buy or sell) of the underlying product in the future as defined today.

How is CME trading?

There are two types of trade on the Chicago Merc. Traditional in-house trading and electronic trading using the CME Globex Trading System platform. However, the popularity of traditional trading is declining year by year. Therefore, decisions are made to close subsequent parquet floors.

CME Globex e-commerce

It was introduced in 1992. It was the first global platform for electronic commerce futures contracts. It is used by both traders located on the physical trading floor and people ordering online transactions from anywhere in the world.

Traditional open outcry trading

It consists in trading while being on the stock exchange floor. Individual traders have:

  • special vests (which make it possible to distinguish individual companies),
  • headphones (thanks to them, brokers provide them with current information about transactions that interest them),
  • cards for saving transactions and
  • an electronic device for trading (this is a tablet-like device).

With the help of the latter, they can report transactions on CME Globex on an ongoing basis.

Additionally, traditional trading uses a special sign language (called Arb), which facilitates communication on the trading floor.

Interesting facts about the Chicago Commodity Exchange

  • Orders placed by traders from the trading floor on CME Globex have priority. They bypass the online order queue and go to its beginning.
  • After the COVID-19 pandemic, CME Groupe decided to permanently close some of its stock exchanges.
  • In the 1960s, a futures contract for frozen pork bacon was introduced at CME for the first time.
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