CME’s journey from egg and butter to stock index futures

The Chicago Mercantile Exchange Inc. (CME) operates a futures exchange in Chicago, Illinois. It administers futures contracts for its financial products like stock indexes, commodities and foreign exchange. CME started as the Chicago Butter and Egg Board in 1898, namely because it only traded futures contract on eggs and butter. In December 1919, it changes its name to Chicago Mercantile Exchange Inc.

Bryan Durkin is the current president and Terence A. Duffy served as the Chairman and Chief Executive Officer of the CME group.

Expansion on product line throughout the years

1961 – Introducing futures for frozen pork belly

1964 – Started trading live cattle futures

1972 – Produced future contracts for foreign currencies

1982 – Produced stock index futures

The exchange was originally a non-profit organization but later demutualized and became a for-profit organization in 2000.

Trading Today

The Chicago Mercantile Exchange today is the largest exchange of futures contract and options in the United States including any in New York City; it is the second largest in the world.

The Chicago Mercantile Exchange utilizes two trading methods; Open Outcry and the CME Globex electronic trading platform.  The Open Outcry method consists of floor traders wearing distinctive colored jackets to determine which firm they belong to. They stand on trading pits making complex hand signals (Arb) to call out prices, quantities and orders of a certain commodity.

The CME Globex Trading is a fully electronic trading system that was proposed in 1987 and was formally introduced in 1992. Today, it is the heart of CME because it gives market participants the ability to trade while on the comfort of their homes. Almost 80% of exchange happens on Globex electronically.