Over the past several years the Commodity Futures Exchanges have seen many mergers and one new Exchange arrival. Most of this was done to be financially competitive with their International competition. Each Exchange has large institutional and commercial customers that they must keep satisfied with low trade execution cost and excellent service. The Exchanges’ trading volume here in the United States was primarily driven by trading pits (open outcry). This meant there was more physical location and employees needed to make this operation work. In the end the cost to run an open outcry style Exchange is much more than an electronically traded Exchange. In Europe they had already gone to a majority of electronic trading thereby keeping their operations cost down. With lower operating cost they were able to pass these savings onto institutional and commercial traders. The United States Exchanges saw this and immediately became concerned with losing their customers to the European Exchanges.
One of the biggest changes made to be competitive was the acquisition that the Chicago Mercantile Exchange (CME) made. They bought the Chicago Board of Trade (CBOT) and the New York Mercantile Exchange (NYMEX) and created the new Exchange CMEGroup. By doing this the CMEGroup was able to be more competitive with the Europeans based on operating cost. The acquisition also created the world’s largest Futures Exchange, the CMEGroup. No other Exchange comes close to the volume traded at the CMEGroup. The European Exchanges come in at a distant second place.
The Chicago Futures markets started trading in 1848. With a long track record of integrity and products needed for the trading community it is no wonder traders feel so comfortable trading on the CMEGroup.
Competition keeps the world going and prices low around the world. The Commodity Futures markets are no exception. In early 2000 a new Exchange was developed that was purely electronically traded. The Inter-Continental Exchange (ICE) is headquartered in Atlanta, Georgia. ICE has electronic Exchanges in Canada and Europe as well.
After 9/11/2001, and the collapsing of the World Trade Center, the New York Board of Trade (NYBOT) was destroyed. They moved to a backup facility until they were later acquired by ICE in 2007.
ICE has always tried to take volume away from… Continue Reading