Situated at 20 S. Wacker Drive, Chicago, also known as Merc, the Chicago Mercantile Exchange (CME) is a famous exchange for trading futures and options. This organized exchange lets you trade futures, options, and stocks in various sectors, including metals, currencies, stock indices, agriculture, real estate, and energy.
CME History – An Overview
Formerly known as the Chicago Butter and Egg Board, CME traded agricultural products. This organization was established in 1898. The name of this organization was changed to CME in 1919. CME is the first financial exchange to change its organizational structure to become a publicly-traded, shareholder-owned corporation. This transformation occurred in 2000.
The first futures contracts of Merc were launched in 1961. After 8 years, they introduced financial futures and currency contracts. It was in the 1970s that CME or Merc introduced financial futures trading. Later, treasuries, metals, and other assets were added to become a full-fledged exchange.
Chicago Board of Trade (CBOT) History – An Overview
Founded in 1848, the Chicago Board of Trade is a well-known commodity exchange in the USA. This exchange was used for trading agricultural commodities in the beginning stage. It was formed to help farmers and commodity consumers of corn and wheat. CBOT focuses on managing risks by eliminating price uncertainty from these products.
The headquarters of this organization is in Chicago. Notable achievements of the Chicago Board of Trade include introducing futures contracts on products like cattle and other livestock and trading contracts associated with financial products, metals, and energy. Later, options contracts were introduced to help traders and investors improve their risk management strategies.
The Merger of CME and CBOT
The merger of the Chicago Mercantile Exchange and the Chicago Board of Trade in 2007 was a vital milestone in the history of the US financial market. The joint venture of these two entities is known as the CME Group. It is one of the largest exchange operators on the planet nowadays.
The CME group runs many other exchanges in different cities in the USA. Today, it also trades weather derivatives and cryptocurrencies like Bitcoin. After the merger in 2017, the joint venture acquired many companies to extend its presence. NYMEX Holdings, Inc. and Commodity Exchange, Inc., also known as COMEX, were bought in 2008. CME went on to buy a 90% interest in the Dow Jones stock and financial indexes in 2010.
The Chicago Mercantile Exchange Group bought the Kansas City Board of Trade in 2012. It was in 2017 that CME opened trading in Bitcoin futures. The annual contracts that MME handles are around 3 billion. The total worth of these contracts will come around $1 quadrillion. This group also focuses on CME clearing to make it one of the most prominent central counterparty clearing providers.
The Digital Transformation of the CME Group
If you analyze the daily volume, you can find that the CME is the largest futures trading and options trading exchange in the USA. The valuation of this group crossed $26 billion in 2020. It employs more than 4,370 people directly. The total revenue of the company in 2020 was $4.9 billion. The net income in 2020 is $2.1 billion.
The digital transformation of the company can be termed as phenomenal. The prime focus of the CME Group is to take advantage of the technological developments to reduce the latency and increase the speed of the trade. The speed and performance are critically important in futures trading. This company leaves nothing to guesswork when it comes to offering trading solutions for customers.
In 2013, the Chicago Mercantile Corporation purchased separate software applications for every minute finance function. All these products were hosted on their servers. Later, they implemented an intuitive new cloud ERP for their HR and Finance departments. This decision took the operational efficiency of the organization to the next level.
The latest reports suggest that the CME Group has entered into a 10-year digital transformation and co-innovation deal with Google Cloud. This contract lets the company migrate its entire technology infrastructure to Google’s public cloud. It ensures excellent operation scalability and makes services accessible to numerous customers. According to the CME Group, this Google cloud migration helps them streamline their operations. Other benefits include IT infrastructure optimization and automation of non-trading operations.
The CME Group has also purchased many other applications to deliver the ultimate experience to their clients. For making the content delivery network more dynamic, the company purchased the Amazon Elastic Load Balancing (ELB). The company uses DigitalOcean Droplets to enhance the quality of application hosting and computing services. It has also made many other software purchases to meet the ever-evolving needs of employees and customers.
Outstanding Trading Solutions for Clients
Millions of people rely on CME for futures trading. With improved versatility and scalability, this financial exchange makes the trading experience highly convenient and enjoyable for people. Customers can utilize Google Cloud’s data analytics and machine learning solutions to receive on-demand information and toolkits for various trading-related tasks, including new model development and algorithms. Further, real-time risk management becomes a hassle-free process.
Both Google and the CME Group have started making joint efforts to introduce highly advanced data analytics services and risk mitigation tools. Your futures and options trading efforts can be made goal-oriented with these excellent solutions in the immediate future. As part of this new deal, Google has invested $1 billion in equities of the CME Group.
With a perfect blend of best-in-class financial talent of the CME Group and the unbeatable engineering expertise of Google, you can expect unparalleled technological innovation acceleration in capital markets infrastructure. This association will transform the way derivative markets operate within a few years.
Experience a New Culture of Innovation with the Chicago Mercantile Exchange Group
MTM (Daily mark-to-market) prices on all contracts are one of the defining features of the futures markets. If you look at the trading scenario before the regulatory reform enactment after the financial crisis in 2007-08, you can find that MTM was the distinguishing difference between forwards and futures. There was no official daily settlement price for OTC forwards and swaps. This situation made it extremely difficult for clients to know the daily variation. They had to rely only on a theoretical pricing model.
Today, the final daily settlement price for futures is the same for everybody. The exchange sets an official daily settlement price for futures. This aspect attracts many people to futures trading. The CME Group offers top-quality futures trading solutions and tools to make your trading efforts result-oriented. The company is committed to delivering innovative ways to manage risk and enhance performance.
CME Group offers a variety of tradable products on a single platform with worldwide availability. The trading services of the Chicago Mercantile Exchange Group are made available in more than 150 countries. Whether you look for metals, energy, agriculture, currencies, stock indexes, or interest rates, the company has your needs covered. It also provides alternative investment products like real estate and weather.
The centralized global exchange of the CME provides smooth, equal access and transparent pricing for customers. The CME Clearing is the most advanced derivatives clearing facility available today. So you can expect unrivaled financial integrity.
What Makes CME Group Future Markets Superior?
As a futures trading enthusiast, you can diversify your portfolio using the unique products offered by the CME Group. You can find futures trading products form all leading assets classes. The digital innovation embraced by CME helps it deliver established futures markets with high liquidity.
Offering electronic access to a wide range of products on a single platform, the Chicago Mercantile Exchange market attracts numerous participants and millions of daily contracts. This high volume lets traders execute various orders rapidly and efficiently, without a considerable price change.
The centralized marketplace of CME reveals prices clearly for all stakeholders involved. Futures trading will become transparent and fair for all participants. Customers have access to the right resources that help them navigate economic uncertainty, mitigate risk, and leverage every opportunity virtually throughout the day and night.
The financial and regulatory surveillance department of CME Clearing analyses clearing member records to maintain compatibility with customer protection requirements. The timeliness and precision of the information delivered to CME clearing members influence the integrity of customer protection. Any violation leads to serious non-compliance and regulatory penalties. You don’t need to worry about fines or penalties when relying on CME. Thanks to the vigilant financial and regulatory surveillance department of CME Clearing.
CME Clearing offers top-of-the-line financial integrity to make markets more productive and efficient. It performs all tasks, including trading account settlement, trades clearing, collection and maintenance of performance bond funds, delivery regulation, and trade data reporting with 100% precision. These features and benefits help the CME Group stand taller among the competitors.
Conclusion
Four exchanges constitute the Chicago Mercantile Exchange Group, CME, COMEX, NYMEX, and CBOT. It is a highly reputed and most diverse derivatives marketplace you can come across today. Each exchange offers a wide array of international benchmarks across leading asset classes. With the digital transformation, CME has taken the quality of futures trading and other trading options to unprecedented heights. Overall, this US-based financial derivatives exchange focuses on delivering the most advanced and reliable solutions for its clients.
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Risk Disclosure:
Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure:
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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