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Chicago Mercantile Exchange (CME)

Chicago Mercantile Exchange (CME)

What Is the Chicago Mercantile Exchange?

The Chicago Mercantile Exchange (CME), informally known as the Chicago Merc, is an organized exchange for the trading of futures and options. The CME trades futures, and generally speaking options, in the sectors of agriculture, energy, stock indices, foreign exchange, interest rates, metals, real estate, and, surprisingly, climate.

Grasping the Chicago Mercantile Exchange (CME)

Established in 1898, the Chicago Mercantile Exchange started life as the "Chicago Butter and Egg Board" before changing its name in 1919. It was the principal financial exchange to "demutualize" and become a publicly traded, shareholder-possessed corporation in 2000.

The CME sent off its most memorable futures contracts in 1961 on frozen pork bellies. In 1969, it added financial futures and currency contracts followed by the principal interest rate, bond, and futures contracts in 1972.

Creation of CME Group

In 2007, a merger with the Chicago Board of Trade made the CME Group, quite possibly of the largest financial exchange in the world. In 2008, the CME acquired NYMEX Holdings, Inc., the parent of the New York Mercantile Exchange (NYMEX) and Commodity Exchange, Inc (COMEX). By 2010, the CME purchased a 90% interest in the Dow Jones stock and financial indexes.

The CME filled again in 2012 with the purchase of the Kansas City Board of Trade, the prevailing player in hard red winter wheat. Also, in late 2017, the Chicago Mercantile Exchange started trading in Bitcoin futures.

As indicated by the CME Group, on average it handles 3 billion contracts worth roughly $1 quadrillion annually. In 2021 CME Group ended open outcry trading for most commodities, despite the fact that outcry trading go on in the Eurodollar options pit. Furthermore, the CME Group operates CME Clearing, a leading central counterparty clearing provider.

$1 quadrillion

The rough total value of all CME contracts in a single year.

CME Futures and Risk Management

With vulnerabilities generally present in the world, there is a demand that money managers and commercial substances have devices at their disposal to hedge their risk and lock in prices that are critical for business activities. Futures permit dealers of the underlying commodities to be aware with certainty the price they will receive for their products at the market. Simultaneously, it will empower consumers or purchasers of those underlying commodities to be aware with certainty the price they will pay at a defined time from here on out.

While these commercial substances use futures for hedging, examiners frequently take the opposite side of the trade expecting to profit from changes in the price of the underlying commodity. Examiners expect the risk that the commercials hedge. A large family of futures exchanges, for example, the CME Group gives a regulated, liquid, centralized forum to carry out such business. Likewise, the CME Group gives settlement, clearing, and reporting capabilities that take into consideration a smooth trading scene.


CME is one of the main regulated markets for trading in Bitcoin futures.

CME Regulation

CME is regulated by the Commodity Futures Trading Commission, which directs all commodities and derivatives contracts in the United States. The CFTC is responsible for oversight of brokers and dealers, conducts risk surveillance of derivatives trades, and explores market manipulation and other abusive trade rehearses. It additionally regulates trading in virtual assets, like Bitcoin.

Chicago Mercantile Exchange versus Chicago Board of Trade

The Chicago Board of Trade (CBOT) is another Chicago-based futures exchange, established in 1848. The CBOT initially centered around agricultural products, like wheat, corn, and soybeans; it later expanded to financial products like gold, silver, U.S. Treasury bonds, and energy. The CME merged with the CBOT in 2006, in a move approved by shareholders of the two organizations.

Illustration of Chicago Mercantile Exchange

Most commodities can be traded anyplace, however there's one you can trade at the CME: climate. CME is the main futures exchange to offer derivatives in light of climate events, permitting traders to wager on cold temperatures, sunshine, or precipitation. In 2020, the CME traded upwards of 1,000 climate related contracts each day, with a total annual volume of more than $1 billion.

The Bottom Line

The Chicago Mercantile Exchange is a key part of America's financial infrastructure. Initially a marketplace for settling agricultural futures, it is presently a major trading hub for precious metals, foreign currencies, treasury bonds, cryptocurrencies, and numerous sorts of derivatives.

Chicago Mercantile Exchange FAQs

How Active Is the Chicago Mercantile Exchange?

The CME is the largest futures and options exchange by daily volume. As indicated by CME Group, the exchange handles 3 billion contracts each year, worth roughly $1 quadrillion.

How Big Is the Chicago Mercantile Exchange?

CME Group was valued at $26 billion out of 2020. Notwithstanding the Chicago Mercantile Exchange, CME Group additionally claims the Chicago Board of Trade, the New York Mercantile Exchange, and six different exchanges. CME Group had 4,370 employees in 2020.

The amount Money Does the Chicago Mercantile Exchange Make?

CME Group reported a net income of $2.1 billion of every 2020, with total revenues of $4.9 billion.


  • These days, CME is additionally known for trading unusual commodities like Bitcoin futures and climate derivatives.
  • The Chicago Mercantile Exchange, or Merc, is an organized exchange for trading futures and options.
  • CME was initially called the Chicago Butter and Egg Board and was utilized for trading agricultural products, like wheat and corn.
  • During the 1970s the CME added financial futures, followed in practically no time by precious metals, Treasuries, and different assets.
  • In 2007, the CME merged with the Chicago Board of Trade to make CME Group, one of the world's largest financial exchange administrators. CME Group presently claims several different exchanges in various urban communities.