CME Chicago Mercantile Exchange

The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the
Merc") is an American financial and commodity derivative exchange based in Chicago and
located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg
Board, an agricultural commodities exchange. Originally, the exchange was a non-profit
organization. The Merc demutualized in November 2000, went public in December 2002, and
merged with the Chicago Board of Trade in July 2007 to become a designated contract market
of the CME Group Inc., which operates both markets. The chief executive officer of CME Group
is Phupinder Gill, Terrence A. Duffy is the president and executive chairman of the board, and
Leo Melamed is chairman emeritus. On August 18, 2008, shareholders approved a merger
with the New York Mercantile Exchange (NYMEX) and COMEX. The Merc, CBOT, NYMEX and
COMEX are now markets owned by the CME Group.
Today, the Merc trades several types of financial instruments: interest rates, equities,
currencies, and commodities. It also offers trading in alternative investments, such as weather
and real estate derivatives, and has the largest options and futures contracts open interest
(number of contracts outstanding) of any futures exchange in the world.
As a Designated Self-Regulatory Organization (DSRO), the CME had primary regulatory-audit
authority over firms such as MF Global.
CME also pioneered the CME SPAN software that is used around the world as the official
performance bond (margin) mechanism of 50 registered exchanges, clearing organizations,
service bureaus and regulatory agencies throughout the world.
Trading is conducted in two methods; an open outcry format and the CME Globex electronic
trading platform. Approximately 80 percent of total volume at the exchange occurs
electronically on CME Globex.
Open Outcry
Operating during regular trading hours (RTH), the open outcry method consists of floor traders
standing in a trading pit to call out orders, prices, and quantities of a particular commodity.
Different colored jackets are worn by the traders to indicate their function on the floor
(traders, runners, CME employees, etc.). In addition, complex hand signals (called Arb) are
used. These hand signals were first used in the 1970s. The pits are areas of the floor that are
lowered to facilitate communication, somewhat like a miniature amphitheater. The pits can be
raised and lowered depending on trading volume. To an onlooker, the open outcry system can
look chaotic and confusing, but in reality the system is a tried and true method of accurate
and efficient trading.
Electronic trading
Operating virtually around the clock, today the CME Globex trading system is at the heart of
CME. Proposed in 1987, it was introduced in 1992 as the first global electronic trading
platform for futures contracts. This fully electronic trading system allows market participants
to trade from booths at the exchange or while sitting in a home or office thousands of miles
away. On 19 October 2004, the one billionth (1,000,000,000) transaction was recorded.