e-CBOT

What Was e-CBOT?

E-CBOT was an electronic trading platform operated by the Chicago Board of Trade (CBOT). It was fundamentally used by traders wishing to speculate and hedge against risks in the commodity futures and financial derivatives markets. When the Chicago Mercantile Exchange (CME) bought the CBOT, e-CBOT was rolled into CME's electronic trading platform, Globex. All things considered, e-CBOT no longer exists.

Understanding e-CBOT

E-CBOT was famous among traders in the futures markets who wished to execute in commodities, for example, precious metals, agricultural goods, and energy products. For these traders, commodity futures could be yet are a convenient method for locking in the supply of a specific decent at a manageable price to protect themselves against the risk of costly variances in the commodities markets.

Via example, a commercial bakery could purchase wheat futures to guarantee an affordable supply of wheat over the next year. In the event that the price of wheat rises during the year, the bakery can exercise its futures contract and take delivery of wheat at the predetermined price. Then again, in the event that wheat prices fall, the bakery is free to purchase wheat at a lower cost on the spot market.

In other cases, traders used e-CBOT and other futures markets to speculate on commodity prices. For instance, a trader without a direct need for oil could nonetheless purchase oil futures based on the anticipation that oil prices will rise during the investment term, perhaps due to factors like geopolitical events or an anticipated decline in production volumes. According to the perspective of other market participants, these speculators can increase overall market efficiency by contributing extra liquidity to the marketplace.

Notwithstanding commodity futures contracts, e-CBOT was likewise used to trade other financial derivatives, for example, interest rate swaps, index futures, and options. These products can be useful not just for of speculating on market prices yet additionally as a way for investors to hedge their exposure to different market risks.

For example, an investor with a large position in a specific company could purchase put options in that company so they can sell that company's shares at a relatively high price if its value declines essentially.

Electronic Trading and e-CBOT

The history of the CBOT dates back to 1848, when its trading was all done utilizing the conventional method of physical trading floors, otherwise called "pits." In these trading floors, human brokers would buy and sell utilizing the "open outcry" method, which involved physically calling out the price at which you will buy or sell a specific security.

Like an auction process, traders would use different signals as shorthand for different sorts of orders. For instance, on the off chance that a trader's palm was held with its face out, this would signal a desire to sell a specific security. On the off chance that the palm was facing inward, this would signal a desire to buy. Different other signals were likewise used to indicate the quantity and price of the buy or sell order.

With the advent of the Internet and electronic trading, trading in the pits has become obsolete. The bulk of financial trading moved onto computers, taking into consideration faster and more accurate trading. E-CBOT was one of those electronic trading platforms.

Today, most daily trading is completed via automated systems, in which the process of matching buyers and sellers is handled consequently and instantaneously by advanced computerized systems.

In 2007, the CME bought CBOT. CBOT actually exists as an exchange under the CME Group, as does NYMEX and COMEX. CME's electronic trading platform is Globex, which was the main electronic trading platform for futures and options trading. All trading activity that occurred on e-CBOT eventually moved to Globex.

Highlights

• When the Chicago Mercantile Exchange (CME) bought the CBOT, it rolled e-CBOT into its own electronic trading platform, Globex, resulting in the closure of e-CBOT.
• E-CBOT brought together hedgers and speculators in the commodity futures and financial derivatives markets.
• E-CBOT was the electronic trading platform operated by the Chicago Board of Trade (CBOT) to trade financial derivatives.
• It replaced the physical trading pits that used to be staffed by human traders.

FAQ

Who Regulates the Chicago Mercantile Exchange (CME)?

The CME is regulated by the U.S. Commodity Futures Trading Commission (CFTC). The CFTC is the principal regulator for futures and options.

Does Pit Trading Still Exist?

Pit trading does in any case exist on very few exchanges as electronic trading has made pit trading obsolete. The London Stock Exchange, the Milan Stock Exchange, and the Toronto Stock Exchange were some of the earliest exchanges to move to be completely electronic. The New York Stock Exchange (NYSE) the CME actually have pit traders.

Is the Chicago Board of Trade Closed?

No, the Chicago Board of Trade isn't closed. It was bought by the CME in 2007 yet operates as an exchange. The CBOT trades a variety of futures and options, including Treasury options, swap futures, equity futures, and agriculture futures.