What is CME? All About Chicago Mercantile Exchange

DailyForex.com Team

The Chicago Mercantile Exchange (CME), sometimes referred to as the Chicago Merc, is a regulated futures and options exchange, the largest of its kind in the world. Agro, fuel, market index, Forex, interest rates, precious metals, housing, and even meteorology are among the industries in which the CME trades futures and, in most instances, options.

Chicago Mercantile Exchange (CME)

The Chicago Mercantile Exchange (CME) is America’s largest futures exchange and the globe's second largest for exchanging futures and options on futures. CME was founded as a non-profit corporation in 1898 and was the first U.S. financial exchange to demutualize and then become a stakeholder-owned business in November 2000. In this brief guide, we will go through the most common questions people have about CME.

Introduction to CME Exchange (Chicago Mercantile Exchange)

The Chicago Mercantile Exchange, or Merc, is a regulated futures and options market in Chicago. CME is currently known for trading unconventional commodities such as Bitcoin futures and weather derivatives. Originally known as the Chicago Butter and Egg Board, the CME was established to trade agricultural commodities such as corn and wheat.

Financial futures were added to the CME in the 1970s, followed by rare metals, Treasury bonds, and certain other assets. CME Group, one of the world's leading financial exchange administrators, was formed in 2007 when the CME and the Chicago Board of Trade amalgamated. The CME Group now operates a number of other exchanges in various cities.

What Are Trading Platforms at CME?

Trading takes place in two ways: open outcry and through the CME Globex Trading System, a digital trading platform. On CME Globex, well over 90% of overall volume at the exchange is traded electronically.

The open outcry method, which operates during standard trading hours, involves floor traders stationed in a trading pit calling out orders, rates, and volumes of a certain commodity or its derivatives. Traders wear different colored jackets to show which organization they are a member of. Furthermore, complicated hand motions are used. In the 1970s, these hand gestures were originally developed. Brokers now, on the other hand, use headsets to speak with traders.

Today, the CME Globex Trading System is at the center of CME, operating practically 24 hours a day, seven days a week. Market players can trade from kiosks at the exchange or from their homes or offices hundreds of miles away using this 100% electronic trading system.

What Products Does CME Exchange Provide?

The following products are available with the CME exchange provider:

  • Commodity in Agriculture
  • Cryptocurrency
  • Products for Energy Equity Indexes
  • Interest Rate Products
  • Foreign Exchange Services and Products
  • Precious Metal Products
  • Weather Derivatives

Brief History of CME Group

The Chicago Mercantile Exchange was formed in 1898 as the "Chicago Butter and Egg Board," before altering its name to the Chicago Mercantile Exchange in 1919. In 1961, the CME issued its first futures contracts.

The CME Group was formed in 2007 after consolidation with the Chicago Board of Trade. NYMEX Holdings, Inc. was purchased by the CME in 2008. The CME has obtained a 90% stake in the Dow Jones stock and financial indices by 2010. The latest significant event from the CME is the acquisition of the Kansas City Board of Trade, the major player in hard red wheat. The deal was finalized in 2012.

What’s the Difference Between CME and CBT (Chicago Board of Trade)?

The Chicago Board of Trade (CBOT), established in 1848, is another significant Chicago-based futures exchange. Farming commodities such as maize, wheat, and corn were initially the emphasis of the CBOT. It then added financial items like gold, silver, US Treasury bonds, and fuel to its portfolio. In 2006, the CME and the CBOT combined in a move that was approved by both organizations' shareholders.

Conclusion

I hope this guide answers the most important questions about CME.

FAQ’s

Is CME Group the Chicago Mercantile Exchange?

Yes, CME is the abbreviation of Chicago Mercantile Exchange

Is CME Group legit?

CME is the world's largest financial derivatives exchange. With a strong reputation and thousands of clients and personnel, there is no doubt that CME is entirely legitimate.

Can you trade Crypto on CME?

While you cannot trade direct cryptocurrencies, you can trade Bitcoin futures of CME.

Why do CME gaps get filled?

When the price of Bitcoin starts above or below the preceding day's closing on the CME exchange, a CME gap is generated. The premise that CME markets are shut over the weekend and for part of the day is one of the primary causes of CME gaps. Bitcoin is traded 24 hours a day, seven days a week on several spot exchanges.

How do CME Bitcoin futures work?

The CME Bitcoin futures contract is a cash-settled instrument in US dollars based on the CME CF Bitcoin Reference Rate (BRR). It acts as a daily reference rate for the bitcoin price in US dollars. The BRR converts the flow of main bitcoin spot exchanges into the US dollar price of one bitcoin as of 4 p.m. London Time within a one-hour calculating period.

How do I trade CME for Bitcoin?

CME requires a 37% maintenance margin for bitcoin futures, and hedgers are required to put up 100% of their maintenance margin as a hedge. ‌Speculators' margin is also 110% of maintenance's‌ ‌margin. ‌CME offers margin offsets with other financial products, but new traders do not normally have access to them.

How do I invest in the CME Group?

You can invest in the CME Group by buying the company’s shares. It is listed on the NASDAQ exchange.

DailyForex.com Team
The DailyForex.com team is comprised of analysts and researchers from around the world who watch the market throughout the day to provide you with unique perspectives and helpful analysis that can help improve your Forex trading.

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