What is the CME Group?

Published by Thomas Herold in Investments, Trading

'CME Group' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

The CME Group is the Chicago Mercantile Exchange group of futures market companies. It calls itself the most diverse and global leading marketplace for futures and derivatives. The group itself is made up of four different DCM Designated Contract Markets. These include the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), New York Mercantile Exchange (NYMEX), and the Commodity Exchange (COMEX). All four exchanges have their own commodities which they trade as well as different historical beginnings.

The world comes to the CME Group to manage its risk. The group provides the greatest variety of worldwide benchmark products in every significant class of assets. Through these offerings they assist businesses around the globe in compensating for the many risks they face in the uncertain global economy of today. Chicago Mercantile Exchange received the honors of Exchange of the Year and Risk Awards Winner for 2016.

Beyond their various trading products they offer an educational Futures Institute with a Futures Challenge competition to try to help potential investors learn how to trade these markets. This program takes six days and allows participants to learn interactively and simulate their own trading while they compete against others for cash awards. First place offers $1,000, second place $500, and third place a $250 reward. In order to compete, participants must complete six training modules, lay out their trade plan, and pass a quiz. This gives them a good understanding of the basic operations of futures trading.

The Chicago Mercantile Exchange represents the largest futures and options on futures exchange in the United States and the second largest one in the world. The commodities available to trade on this exchange center on currencies, interest rates, stock indices, equities, and a few agricultural products. CME was established in 1898 as a non profit company. In its early days investors knew the exchange as the Chicago Butter and Egg Board all the way till 1919. CME proved to be the first financial exchange in the U.S. to demutualize so that it could become a company owned by stockholders in November of 2000.

The CBOT’s roots go back to 1848. In its initial days it allowed for trading of agricultural products like soybeans, corn, and wheat. Today it offers trading in agricultural as well as financial contracts. Futures contracts and options today are available on a number of additional products such as energy, U.S. Treasury bonds, gold, and silver.

For many decades the exchange functioned solely as an open auction market. Traders would get together in a trading pit and utilize hand signals to buy and sell. Now the CBOT also offers futures contracts that are electronically traded. The entity became a for profit company via an IPO on the New York Stock Exchange in October of 2005.

NYMEX is the largest futures exchange for physical commodities in the world. The trading done here occurs through the two divisions of NYMEX and COMEX. On NYMEX, traders can participate with platinum, palladium, and energy markets. In COMEX they are able to trade precious and industrial metals such as silver, gold, and copper. COMEX also offers index options on the FTSE 100 exchange in London.

During the day, NYMEX and COMEX utilize a system of open outcry on the floor. After regular trading hours, all trading is done on an electronic trading system. Dairy merchants originally founded the NYMEX as the Butter and Cheese Exchange of New York. NYMEX and COMEX merged together in 1994. Today the exchanges specialize in precious metals and energy products.

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The term 'CME Group' is included in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.