CHICAGO MERCANTILE STOCK EXCHANGE

CHICAGO MERCANTILE STOCK EXCHANGE 4

CHICAGOMERCANTILE STOCK EXCHANGE

ChicagoMercantile Stock Exchange (CME)

Whatis it?

Itis a leading exchange for trading options and futures in foursignificant areas including stock indexes, foreign exchange currency,interest rates and commodities. The company is also referred as theMerc, and it contributes significantly to global risk management. CMEis listed as a public company on the New York stock exchange (McGee,2013).

Whatis going on there?

Theestablishment focuses on the trading of futures and options, whichinvolves contracts to sell or buy something on a specified futuredate. Traders at the CME buy and sell contracts by offering orbidding a price and quantity of contracts (McGee, 2013). Itconcentrates on four major product areas, which are commodities,interest, rates, foreign exchange, and stock indexes. The contractson commodities include cattle, cheese, fertilizer, grains, milk,hogs, butter and lumber among others (Harris, 1970). CME is popularfor its hectic trading whereby price discovery is sought by tradersthat engage in the open outcry system, shouting quantities and pricesor utilizing hand gestures to attract attention and be understoodover the noise. When a trader’s palm is facing out the trade isselling and when it faces inside the trader is buying. However, thissystem has been destabilized by the rapid usage of electronic tradingsuch as CME’s Globex, which is a twenty-four-hour electronicsystem. Presently many traders operate in the pits or electronically(McGee, 2013).

Briefhistory

Thecompany was founded in 1898 as a nonprofit corporation. Initially,the company was known as the Chicago Butter and Egg Board until 1919.It was named so because it only traded contracts in eggs and butter.Following the end of World War I, industry leaders gathered toestablish an organization to allow public participation undercarefully regulated commodity trading rules. Planners such as O.W.Olson and S. E. Davis gathered and established the CME. Over theyears, the exchange has expanded to trade in various commodities. In2000, CME officially became the first U.S financial exchange todemutualize and shift into a shareholder-owned corporation (Harris,1970).

References

Harris,B. E. (1970). Historyof the Chicago Mercantile Exchange.The Chicago Mercantile Exchange. Pp. 49-54. Retrieved from,

&lthttp://www.farmdoc.illinois.edu/irwin/archive/books/Futrs_Tradng_in_Livestck/Futures_Trading_in_%20Livestock_Part%20I_2.pdf&gt

McGee,S. (February 27, 2013). TakingStock: Chicago`s Trading History.Michigan Avenue. Web. Retrieved from,

&lthttp://michiganavemag.com/taking-stock-chicago-trading-history&gt