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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 (CME) and the Chicago Board of Trademarker (CBOT). On March 17, 2008, it announced its acquisition of NYMEX Holdings, Inc., parent company of the New York Mercantile Exchangemarker (NYMEX), which was formally completed on August 22, 2008.[368713]

Building on the merger and acquisitions of CME, CBOT and NYMEX, the CME Group serves the risk management needs of customers on a worldwide basis. The CME Group provides benchmark futures and options products available on any exchange, covering asset classes such as interest rates, equities, FX, commodities, and alternative investments including weather and real estate.

Clearing

Clearing is a principal function of the CME Group. Clearing members protect buyers and sellers from financial loss by assuring performance on each traded contract. All trades are conducted between CME Clearing and a clearing member. Clearing members play a central role in the clearing process. They are highly capitalized, closely monitored and carefully selected companies that stand behind all trades made through CME Group. All CME and CBOT trades must go through a CME Clearing member while NYMEX trades go through a NYMEX clearing member.

Clearing members represent the trades made through all Futures Commission Merchants (CFTC/NFA certified/registered commodities "brokers/dealers") trading on the exchange. Traders who are not themselves clearing members must have a relationship with a clearing member to be able to trade at CME Group. CME Clearing members must also have individual memberships at CME and/or CBOT.

A sample of clearing firm members includes: Goldman, Sachs & Co.; Deutsche Bank Securities Inc.; Bank of America Securities LLC; J.P. Morgan Futures, Inc.; UBS Securities LLC; Morgan Stanley & Co. Incorporated; Merrill Lynch, Pierce, Fenner & Smith Inc; and others.

CME Clearing provides a very important part of risk management. CME Clearing protects the financial integrity of our markets by virtually eliminating credit risk. There has never been a failure by a clearing member to meet a performance bond call or its delivery obligations; nor has there been a failure of a clearing member firm resulting in a loss of customer funds. By serving as the counterparty to every transaction, CME Clearing becomes the buyer to every seller and the seller to every buyer, virtually eliminating credit risk for each market participant.

The protocol is to mark to market twice each day, this helps to limit the accumulation of losses or debt, and hence, help each customer manage its risk as well as containing risk for the market as a whole. The CME Group audit department, in conjunction with other self-regulatory organizations, operates a financial surveillance program to monitor the financial condition of clearing members.

Additionally, CME ClearPort, acquired in the NYMEX transaction in 2008, is a set of flexible clearing services open to OTC market participants to substantially mitigate counterparty risk and provide capital efficiencies across asset classes.[368714]

Membership

CME, CBOT and NYMEX memberships are entirely separate from one another and offer access to different products at different rates. These differences reflect the individual histories of each of the exchanges before they became part of CME Group.

  • CME - There are four basic types of CME memberships: individual; corporate; electronic corporate; and clearing. There are also four divisions of individual CME memberships, representing the four levels of access to CME products: (B1(all products); IMM (B2); IOM (B3); GEM (B4)).
  • CBOT - There are four basic types of CBOT memberships: individual; corporate; electronic corporate; and clearing. There are five levels of individual CBOT memberships: (B1(all products); Associate (B2); Government (GIM B3); IDEM( B4); COM (B5)).
  • NYMEX - There are three basic types of NMYEX memberships: individual; corporate; and clearing. Individual memberships at NYMEX and COMEXmarker enable the member to trade all NYMEX and COMEX products. Such members must registered with the National Futures Association (NFA) as either a floor trader or floor broker before you start trading on the floor.


History timeline

  • 1848 CBOT is established by merchants
  • 1851 CBOT transacts first forward contract (corn)
  • 1859 Illinois grants charter to CBOT
  • 1861 CBOT adopts gold coin as standard as Civil War begins
  • 1865 CBOT develops futures contract for grain; performs clearing; and requires margin
  • 1866 Foreign market link with trans-Atlantic cable
  • 1871 CBOT destroyed by fire
  • 1874 Chicago Produce Exchange created by produce and margarine merchant dealers
  • 1898 Chicago Butter and Egg Board created by butter & egg merchant dealers
  • 1919 Chicago Butter and Egg Board becomes the Chicago Mercantile Exchange (CME), including clearing operations
  • 1922 Federal Government imposes grain trading regulations
  • 1926 CBOT creates the Board of Trade Clearing Corporation (trade guarantees)
  • 1930 CBOT moves to LaSalle & Jackson
  • 1936 CBOT introduce soybean futures
  • 1949 CME introduces auction format trading in open outcry pits (versus blackboard system)
  • 1961 CME introduces pork belly futures
  • 1964 CME introduces live cattle futures
  • 1967 CBOT installs electronic displays on the floor (versus chalkboard and morse code system)
  • 1969 CBOT introduces silver futures (1st metal product)
  • 1972 CME creates International Monetary Market (IMM) for trading foreign currency
  • 1973 CBOT creates the Chicago Board of Options Exchange (CBOE) for options on stocks
  • 1974 Federal Government creates the Commodity Futures Trading Commission (CFTC)
  • 1975 CBOT introduces interest rate futures
  • 1975 CME and IMM become more interdependent (IMM becomes a division)
  • 1976 CME introduces the Treasury Bill
  • 1977 CBOT introduces the Treasury Bond
  • 1981 CME introduces Eurodollar futures
  • 1982 CME creates the Index and Option Market (IOM) division
  • 1982 CME introduces the Standard & Poor 500 futures
  • 1983 CME moves to Wacker
  • 1992 CME introduces the "Globex" electronic trading platform
  • 1994 CBOT introduces the "Project A" electronic trading platform
  • 1997 CBOT introduces Dow Jones Industrial futures
  • 1997 CME introduces E-mini Standard & Poor's 500 futures
  • 2000 CME converts membership to common shares
  • 2002 CME listed on NYSEmarker
  • 2003 CME and CBOT merge clearing operations
  • 2005 CBOT class A common stock listed on NYSE
  • 2006 CBOT and CME sign merger agreement
  • 2007 CME and CBOT officially merge to form CME Group Inc
  • 2008 CME Group acquires NYMEX


See also



References

  1. http://www.cmegroup.com/company/
  2. http://www.cmegroup.com/clearing/cme-clearing-overview/clearing-membership.html
  3. http://www.cmegroup.com/tools-information/clearing-firms.html
  4. http://www.cmegroup.com/clearing/index.html
  5. http://www.cmegroup.com/company/membership/types-of-membership.html
  6. http://www.cmegroup.com/company/membership/types-of-membership-cbot.html
  7. http://www.cmegroup.com/company/membership/types-of-membership-nymex.html
  8. http://books.google.com/books?id=2PYiLBaupYUC&pg=RA1-PA75&dq=CBOT+History+timeline#PRA1-PA72,M1



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