The
Chicago Board of Trade (
CBOT), established in 1848, is the world's oldest
futures and options exchangeA futures exchange or derivatives exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.-History...
. More than 50 different
optionIn finance, an option is a contract between a buyer and a seller that gives the buyer the right, but not the obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price, the strike price. In return for granting the option, the seller collects a...
s and
futures contractFutures contract, in finance, refers to a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price . The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks,...
s are traded by over 3,600 CBOT members through
open outcryOpen outcry is the name of a method of communication between professionals on a stock exchange or futures exchange which involves shouting and the use of hand signals to transfer information primarily about buy and sell orders...
and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million contracts. On 12 July 2007, the CBOT merged with the
CMEThe Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
under the
CME GroupCME Group Inc. is the world’s largest futures exchange. CME Group was created July 12, 2007 from the merger between the Chicago Mercantile Exchange and the Chicago Board of Trade...
holding company and ceased to exist as an independent entity.
The concerns of
U.S.The United States of America is a federal constitutional republic comprising fifty states and a federal district...
merchantA merchant is a businessman who trades in commodities that they do not produce themselves, in order to earn a profit.Merchants can be of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
s to ensure that there were buyers and sellers for
commoditiesA commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk. In other words, copper is copper. The price of copper is universal,...
have resulted into
forward contractA forward contract or simply a forward is an agreement between two parties to buy or sell an asset at a certain future time for a certain price agreed today. This is in contrast to a spot contract, which is an agreement to buy or sell an asset today. It costs nothing to enter a forward contract...
s to sell and buy commodities.
The
Chicago Board of Trade (
CBOT), established in 1848, is the world's oldest
futures and options exchangeA futures exchange or derivatives exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.-History...
. More than 50 different
optionIn finance, an option is a contract between a buyer and a seller that gives the buyer the right, but not the obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price, the strike price. In return for granting the option, the seller collects a...
s and
futures contractFutures contract, in finance, refers to a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price . The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks,...
s are traded by over 3,600 CBOT members through
open outcryOpen outcry is the name of a method of communication between professionals on a stock exchange or futures exchange which involves shouting and the use of hand signals to transfer information primarily about buy and sell orders...
and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million contracts. On 12 July 2007, the CBOT merged with the
CMEThe Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
under the
CME GroupCME Group Inc. is the world’s largest futures exchange. CME Group was created July 12, 2007 from the merger between the Chicago Mercantile Exchange and the Chicago Board of Trade...
holding company and ceased to exist as an independent entity.
History
The concerns of
U.S.The United States of America is a federal constitutional republic comprising fifty states and a federal district...
merchantA merchant is a businessman who trades in commodities that they do not produce themselves, in order to earn a profit.Merchants can be of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
s to ensure that there were buyers and sellers for
commoditiesA commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk. In other words, copper is copper. The price of copper is universal,...
have resulted into
forward contractA forward contract or simply a forward is an agreement between two parties to buy or sell an asset at a certain future time for a certain price agreed today. This is in contrast to a spot contract, which is an agreement to buy or sell an asset today. It costs nothing to enter a forward contract...
s to sell and buy commodities. Still,
credit riskCredit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit .-Faced by lenders to consumers:...
remained a serious problem. The CBOT took shape to provide a centralized location, where buyers and sellers may meet and negotiate and formalize forward contracts.
In 1864, the CBOT listed the first ever standardized "exchange traded" forward contracts, which were called
futures contractFutures contract, in finance, refers to a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price . The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks,...
s. In 1919, the
Chicago Butter and Egg BoardThe Chicago Butter and Egg Board, founded in 1898, was a spin-off entity of the Chicago Board of Trade . In the year 1919, it was re-organized as the Chicago Mercantile Exchange . Roots of the Chicago Butter and Egg Board are traceable to the 1800s....
http://www.cme.com/about/ins/caag/opebusines2798.html, a spin-off of the CBOT, was reorganized to enable member traders to allow future trading, and its name was changed to
Chicago Mercantile ExchangeThe Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
(CME).
On October 19, 2005, the
initial public offeringAn initial public stock offering referred to simply as an "offering" or "flotation," is when a company issues common stock or shares to the public for the first time...
(IPO) of 3,191,489 CBOT shares was priced at $54.00 (USD) per share. On its first day of trading the stock closed up +49% at $80.50 (USD) on the NYSE.
In 2007, the CBOT and the CME merged to form the
CME GroupCME Group Inc. is the world’s largest futures exchange. CME Group was created July 12, 2007 from the merger between the Chicago Mercantile Exchange and the Chicago Board of Trade...
.
The Building
Since 1930, the Chicago Board of Trade has been operating out of 141 West Jackson Boulevard, Chicago. It is housed in a building designed by
architectAn architect is trained and licensed in planning and designing buildings, and participates in supervising the construction of a building. Etymologically, architect derives from the Latin architectus, itself derived from the Greek arkhitekton , i.e. chief builder...
s
Holabird & RootThe architectural firm of Holabird & Roche was founded in Chicago in 1880. The firm rose to prominence under the leadership of William Holabird and Martin Roche. Both men had worked in the office of William LeBaron Jenney before striking out on their own...
that is 605 feet (184 m) tall, the tallest in Chicago until the
Richard J. Daley CenterThe Richard J. Daley Center, also known by its courtyard Daley Plaza and named after longtime mayor Richard J. Daley, is the premier civic center of the City of Chicago in Illinois. Situated on Randolph and Washington Streets between Dearborn and Clark Streets, the Richard J. Daley Center is...
superseded it in 1965. This
Art DecoArt Deco was a popular international art design movement from 1925 until the 1940s, affecting the decorative arts such as architecture, interior design, and industrial design, as well as the visual arts such as fashion, painting, the graphic arts, and film...
building incorporates sculptural work by Alvin Meyer and is capped by a 31 foot (9.5 m) tall statue of the
goddessA goddess is a female deity. Often deities are part of a polytheistic system that includes several deities in a pantheon. In some cultures goddesses are commonly associated with the Earth, motherhood, love, and the household, often reflecting the historical gender roles of that culture...
Ceres in reference to the exchange's heritage as a
commodityA commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk. In other words, copper is copper. The price of copper is universal,...
market.
Ceres is faceless because its sculptor,
John StorrsJohn Storrs, also known as John Henry Bradley Storrs, John Bradley Storrs and John H. Storrs, was a pioneer American modernist sculptor who was born in Chicago in 1885. In 1905, he traveled to Berlin to study singing, but he soon decided to become a sculptor...
, believed that the forty-five story building would be sufficiently taller than any other nearby structure and as a result that no one would be able to see the sculpture's face anyway.
On May 4, 1977, the
Chicago Board of Trade BuildingThe Chicago Board of Trade Building is a skyscraper located in Chicago, Illinois, United States. It stands at 141 W. Jackson Boulevard at the foot of the LaSalle Street canyon, in the Loop community area in Cook County. Built in 1930 and first designated a Chicago Landmark on May 4, 1977, the...
was designated a
Chicago LandmarkChicago Landmark is a designation of the Mayor of Chicago and the Chicago City Council for historic buildings and other sites in Chicago, Illinois, United States. Listed sites are selected after meeting a combination of criteria, including historical, economic, architectural, artistic,...
http://www.ci.chi.il.us/Landmarks/B/BoardTrade.html. The building is now a
National Historic LandmarkA National Historic Landmark is a building, site, structure, object, or district, that is officially recognized by the United States government for its historical significance. All NHLs are listed in the National Register of Historic Places...
. Today the Board of Trade Building is closely joined by numerous
skyscraperA skyscraper is a tall, continuously habitable building. There is no official definition or height above which a building may clearly be classified as a skyscraper...
s in the heart of Chicago's busy Loop commercial neighborhood.
The Pit
The pit is a raised
octagonIn geometry, an octagon is a polygon that has eight sides. A regular octagon is represented by the Schläfli symbol {8}.-Regular octagons:A regular octagon is always an octagon whose sides are all the same length and whose internal angles are all the same size.The internal angle at each vertex of a...
al structure where open-outcry trading takes place. Operating during regular trading hours (RTH), the CBOT trading floor contains many such pits.
The steps up on the outside of the
octagonIn geometry, an octagon is a polygon that has eight sides. A regular octagon is represented by the Schläfli symbol {8}.-Regular octagons:A regular octagon is always an octagon whose sides are all the same length and whose internal angles are all the same size.The internal angle at each vertex of a...
and the steps down on the inside give the pit something of the appearance of an amphitheater, and allow hundreds of traders to see and hear each other during trading hours. The importance of the pit and pit trading is emphasized by the use of a stylized pit as the logo of the CBOT. "The Pit" is also the title and subject of a classic novel (1903) by
Frank NorrisBenjamin Franklin Norris, Jr. was an American novelist, during the Progressive Era, writing predominantly in the naturalist genre. His notable works include McTeague , The Octopus: A California Story , and The Pit .-Life:Frank Norris was born in Chicago, Illinois in 1870...
http://www.gutenberg.org/etext/4382.
Trades are made in the pits by bidding or offering a price and quantity of contracts, depending on the intention to buy (bid) or sell (offer).
This is generally done by using a physical representation of a trader's intentions with his hands. If a trader wants to buy ten contracts at a price of eight, for example, in the pit he would yell "8 for 10", stating price before quantity, and turn his palm inward toward his face, putting his index finger to his forehead denoting ten; if he were to be buying one, he would place his index finger on his chin. If the trader wants to sell five contracts at a price of eight, they would yell "5 at 8", stating quantity before price, and show one hand with the palm facing outward, showing 5 fingers. The combination of hand-signals and vocal representation between the way a trader expresses bids and offers is a protection against misinterpretation by other market participants.
News lines
- On August 1, 1974, trading at The Chicago Board of Trade was halted after an anonymous caller said a bomb had been placed in the building.
- On October 22, 1981, trading was halted on the Chicago Board of Trade and the Philadelphia Stock Exchange
Philadelphia Stock Exchange is the oldest stock exchange in the United States, founded in 1790. It is now owned by NASDAQ and located at 1900 Market Street, in Center City Philadelphia.-History:...
after anonymous callers said bombs had been placed in those buildings.
- On August 1, 2006, the CBOT launched side-by-side trading for agricultural futures. Orders can now be traded electronically or placed by pit traders using open outcry, creating a single pool of liquidity.
- On October 17, 2006, the Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
announced the purchase of the Chicago Board of Trade for $8 billion in stock, joining the two financial institutions as CME Group, IncCME Group Inc. is the world’s largest futures exchange. CME Group was created July 12, 2007 from the merger between the Chicago Mercantile Exchange and the Chicago Board of Trade...
. CBOT currently uses outsourced technology platforms, but will move to CME's Globex trading system. This will provide much of the merger's anticipated savings. The merger will also strengthen the combined group's position in the global derivatives marketThe derivatives markets are the financial markets for derivatives. The market can be divided into two, that for exchange traded derivatives and that for over-the-counter derivatives...
.
- On July 9, 2007 CBOT Shareholders approve merger with the Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
"creating the largest derivatives market ever."
See also
- Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
- CME Group
CME Group Inc. is the world’s largest futures exchange. CME Group was created July 12, 2007 from the merger between the Chicago Mercantile Exchange and the Chicago Board of Trade...
- Commodity Exchange Act
Commodity Exchange Act is a federal act passed in 1936 by the U.S. Government ....
- Horatio G. Loomis
Loomis was a native of Vermont who came to Chicago as a pioneer settler in 1834. A grocer by trade, Loomis also was an entrepreneur who became involved in many business fields, including commodities trading....
- List of futures exchanges
- List of traded commodities
- New York Mercantile Exchange
For the French maritime organisation, see Compagnie maritime d'expertisesThe New York Mercantile Exchange is the world's largest physical commodity futures exchange, located in New York City. Its two principal divisions are the New York Mercantile Exchange and Commodity Exchange, Inc which were...
External links