CME Group Inc. provides products across all asset classes, by trading futures, options, cash and over-the-counter (OTC) products. The Company offers a range of products across interest rates, equity indexes, foreign exchange (FX), agricultural commodities, energy and metals. It also offers cash and repo fixed income trading through BrokerTec, and cash and OTC FX trading through electronic broking services (EBS). The Company’s segment consists of the Chicago Mercantile Exchange Inc. (CME), Board of Trade of the City of Chicago, Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX), Commodity Exchange, Inc. (COMEX) and its cash markets business. In addition, it operates central counterparty clearinghouses. The Company offers clearing, settlement and guarantees for all products cleared through the clearinghouse. Its subsidiaries include Astley & Pearce Limited, Board of Trade of the City of Chicago, Inc., BrokerTec Americas LLC, BrokerTec Europe Limited and BrokerTec Holdings Inc.
Mergers and acquisitions
On October 17, 2006, The Chicago Mercantile Exchange announced a merger with its historic rival the Chicago Board of Trade for $8 billion in stock, joining the two financial institutions as CME Group Inc. The merger agreement was modified on December 20, 2006, May 11, 2007, June 14, 2007 and on July 6, 2007. The merger was approved by shareholders of both CME and the Chicago Board of Trade on July 9, 2007. and closed on July 12, 2007, after which the Chicago Board of Trade shares (old symbol: BOT) stopped trading and were converted into CME shares as agreed, and the overarching holding company began life as CME Group, a CME/Chicago Board of Trade Company. On January 13, 2008 electronic trading at the Chicago Board of Trade shifted to CME Globex.
On March 17, 2008, New York Mercantile Exchange (NYMEX) (owner of both the NYMEX exchange and the Commodity Exchange (COMEX)) accepted an offer from CME Group, to purchase NYMEX for $8.9 billion in cash and CME Group Stock. The acquisition was formally completed on August 22, 2008, and the NYMEX systems were fully integrated by September 30, 2009. Also in 2007, NYMEX in a joint venture with partners on the Arabian Peninsula opened the Dubai Mercantile Exchange (DME).
On February 10, 2010, CME announced its purchase of 90% of Dow Jones Indexes, including the Dow Jones Industrial Average. CME subsequently contributed Dow Jones Indexes to the formation of S&P Dow Jones Indices in exchange for a 24.4% ownership interest. In April 2013, CME purchased the remaining 10% interest in Dow Jones Indexes for $80.0 million. As a result, CME’s interest in S&P Dow Jones Indices increased from 24.4% to 27.0%.
On October 17, 2012, CME Group announced it would acquire the Kansas City Board of Trade for $126 Million in cash. KCBOT was the dominant venue for the sale of hard red winter wheat. The Chicago Board of Trade was the leading trade platform for soft red winter wheat.
On March 29, 2018, CME Group announced that it was buying London-based NEX Group for $5.5 billion. The acquisition was completed on November 2, 2018.
What is the COMEX?
The COMEX (Commodity Exchange Inc.) is the primary futures contract and options market for trading derivatives on precious metal prices for gold and silver, as well as for non-ferrous metals like copper and aluminum.
The COMEX merged with the New York Mercantile Exchange (NYMEX) in 1994 and the two combined are most responsible for precious metal price discovery today. Similar to COMEX gold and silver derivative futures contracts, both platinum bullion and palladium bullion prices respectively are heavily influenced by their derivative futures contracts traded under the NYMEX brand name.
The CME Group has owned and operated both the COMEX and NYMEX since acquiring them in 2008.
The CME Group also owns and operates the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT).
While virtually unreported in the mainstream financial media, the CME Group now actively incentivizes government partnered central banks to trade commodity derivatives on all four of its commodity exchanges, all of which can sharply influence the prices of real world goods around the world.
The volumes that various central banks are actually trading commodity derivatives at the moment remains unknown as the CME Group has yet to divulge this data to date.
COMEX Founding (1933)
The COMEX, or more formally the Commodity Exchange Inc., was founded in New York in 1933. The COMEX was formed through the merger of four smaller exchanges based in New York: the National Metal Exchange, the National Raw Silk Exchange, the Rubber Exchange of New York, and the New York Hide Exchange.
The second half of COMEX history is closely linked to the history of the world’s later 20th and 21st Century gold price. And not merely the gold price vs US dollars, but the COMEX has also heavily influenced the gold price vs all fiat currencies issued over the same timeframe.
Coincidentally in the same year the COMEX was founded (1933), the then US President Roosevelt banned private US citizen gold bullion ownership of 5 troy ounces or more. demanded under the threat of fine and prosecution that the vast majority of private physical gold holdings of American citizens be turned in to Federal Reserve bank branches.
This ban of US citizens no being allowed to hold more than 5 troy ounces of gold bullion per US citizen stood in effect for 40 years until the start of 1975. It was then that US citizens were again allowed to buy, own, and save gold bullion in volume. The US dollar price of gold began in 1975 priced at over $185 oz USD.
The New York Mercantile Exchange (NYMEX) made its debut in 1872 as the Butter and Cheese Exchange of New York but did not get its current name until 10 years later when it diversified its contracts to add fruits and poultry.
Founded by a group of dairy merchants who sought better storage and trading for their perishable commodities, Nymex today is the world’s largest physical commodity futures exchange. Nymex has achieved this status in large part due to its energy-related futures, which it launched in 1978 with a heating oil contract.
Success in the commodity futures exchange business does not come easily. It may be hard to believe, but there were more than 1,000 U.S. commodity exchanges in the 19th century, operating mostly as marketplaces where sellers displayed local produces and goods.
But the small exchanges could not long compete against their larger rivals in Chicago and New York, which operated centralized warehouses needed to support trading in physical commodities. The “bazaars” quickly made way for the organized exchanges where contracts can change hands many times before maturation. Physical delivery is fully handled outside the exchange, from specifically designated warehouses.
A crucial step for Nymex was its acquisition of COMEX in 1994. Comex—which first stood for Commodity Exchange—itself resulted from the 1933 fusion of the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange and the New York Hide Exchange.
NYMEX today trades energy products, including electricity, precious and rare metals, copper and aluminum as well as some stock index futures, such as the FTSE Eurotop contracts. Trading is mostly conducted via open-outcry on NYMEX, but the exchange’s futures contracts are electronically available on NYMEX ACCESS, a platform launched in 1993, after the close.
With volatile production and geopolitical conditions, crude oil is the most actively traded commodity in the world and has contributed to NYMEX’s expansion. Britain’s Brent is a light, sweet North Sea crude oil, which is an industry benchmark and trades as a differential to NYMEX bellwether light sweet crude futures contract.
E-miNY futures contracts, which are half the size of a standard crude futures contract, are in great demand among portfolio managers. They are electronically traded on the Chicago Mercantile Exchange’s Globex platform but cleared via NYMEX clearinghouse.
Also in the Big Apple, the New York Board of Trade (NYBOT) is another futures market that resulted from the 1998 merger of smaller markets—the Coffee, Sugar and Cocoa Exchange and the New York Cotton Exchange.
The Chicago Board of Trade, organized by 82 Chicago merchants as a grain cash market in 1848, is the oldest organized futures exchange.
Although experts may argue about the exact birth date of futures trading, the CBOT was already very active during the Civil War—even financing Union regiments—and trading “to-arrive” or forward contracts in agricultural commodities including wheat, corn and oats.
The official birth date of the CBOT may be 1859, when the market was granted a charter by the Illinois legislature to standardize grades of grain traded on the exchange. Futures contracts made their official debut in 1865 when the CBOT introduced standards for margin and delivery.
While the stock market crashed in 1873, futures trading continued to boom, which led to a series of innovations at the CBOT, such as publishing futures prices starting in 1877 and setting up the first clearing organization in 1883.
When the CBOE erected new headquarters to accommodate its expansion in 1885, the building was the first to use electrical lighting. By 1922, the growth in commodity futures trading was such that the U.S. government felt the need to create a regulator, the Grain Futures Administration.
Major CBOT innovations included the creation of a separate exchange to trade options, the Chicago Board Options Exchange (CBOE), in 1973, and diversification into non-commodities contracts: futures on mortgaged-backed securities in 1975 and on U.S. Treasuries in 1977, while options on futures were created in 1982.
The CBOT celebrated its 150th anniversary with the launch of side-by-side trading of open-outcry and electronic trading on its Project A platform in 1998, paving the way for a move toward electronic trading for financial products.
In 2000, the CBOT is incorporated as a not-for-profit non-stock corporation and launches a new trading platform, a/c/e, in a partnership with German derivatives giant Eurex. This will help the exchange further diversify its lines of products, including mini-Dow futures and interest rate swaps and swap options.
Three years later, the CBOT announced it was switching to a new platform, Euronext’s Liffe Connect, which marked the end of its partnership with Eurex. In 2004, the exchange partnered with the Chicago Mercantile Exchange which agreed to clear all CBOT products on a new CME/CBOT Common Clearing Link.
The CBOT is a leading market for contracts based on four groups of products: agricultural commodities; interest rates, including Treasuries and German debt; the Dow Jones Industrial Average index; and gold and silver.
The predecessor of the Chicago Mercantile Exchange, the Chicago Butter and Egg Board, was formed in 1898 and became the CME in 1919 when it broadened the breadth of its offering—one egg and one butter contract at first—to include a wide range of agricultural products. It was named the Chicago Produce Exchange in 1874.
Since, the CME has continued to diversify its roster of listings and is now best known worldwide for its financial products, including its flagship Eurodollar contract. Four main categories of products trade on the CME: interest rates, stock indexes, foreign exchange and commodities.
The CME is the largest U.S. futures exchange and continues to transition a wide range of products from its open-outcry pit to its electronic platform, Globex, which made its debut in June 1992.
Globex was initially developed with Reuters and first offered futures and options on futures contracts on major currencies. The benchmark three-month Eurodollar futures and options on futures contracts started trading on the platform in August 1992, followed the next year by equity products, including contracts on the S&P 500 index.
A decade later, the CME introduced Globex’s next generation platform, based on France’s NSC trading system as part of an innovative product swap where the Paris Bourse, now part of Euronext, received the CME’s state-of the art clearing system, CLEARING 21.
Once orders for products listed on Globex are placed through front-end applications worldwide, they are immediately acknowledged and matched by the trading engine. Trade reports are immediately disseminated to the trading parties, the CME Clearing House, and the market at large.
Continuing its tradition of product innovation, the CME launched E-mini S&P 500 futures contracts in 1997, with electronic trading during open outcry hours for the first time. The contract quickly became the exchange’s fastest growing product.
Another success came in 1999 with the E-mini NASDAQ-100 futures, while “side-by-side” electronic and pit trading in Eurodollars started during regular hours. In June 2002, the CME added onto Globex e-miNY crude oil and natural gas futures contracts that clear via the New York Mercantile Exchange clearing house.
A milestone for the Chicago exchanges came in November 2003 when the CME began providing clearing services to the Chicago Board of Trade (CBOT) for commodity, equity and interest rate products. In 2004, the CME became the world’s largest clearing organization for futures.
Further endorsing electronic trading, a special shareholder meeting approved in the spring of 2004 transitioning the front two Eurodollar futures products onto Globex.
The CME regularly upgrades Globex by adding patent-pending functionality, such as the Implied Pricing Functionality for Eurodollars, which allows electronic calendar spread trading for Eurodollar futures. Enhanced options functionality for electronically traded CME Eurodollars facilitates trading of complex combination and spread trades typically used with short-term interest rate options on futures.
The CME is also leveraging its electronic access to become a global exchange, setting up Globex communications hubs in Germany, Ireland, the Netherlands, France, Britain, Gibraltar, Italy and now Singapore. The exchange has developed two Japanese monthly and seasonal CME Weather contracts for the Tokyo and Osaka exchanges, based on the Pacific Rim Index.