Chicago Mercantile Exchange
The Chicago Mercantile Exchange (CME) is a major marketplace for derivatives products, particularly futures and options. This guide to trading on the CME uncovers the products available and the history of the group. See our list of top Chicago Mercantile Exchange brokers to start trading online:
Chicago Mercantile Exchange Brokers UK
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Interactive Brokers (IBKR) is a premier brokerage for experienced traders, providing access to 150 markets in 33 countries, along with a suite of comprehensive investment services. With over 40 years of experience, this Nasdaq-listed firm adheres to stringent regulations by the SEC, FCA, CIRO, and SFC, amongst others, and is one of the most trusted brokers for trading around the globe.
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NinjaTrader is a US-headquartered and regulated brokerage that specializes in futures trading. There are three pricing plans to suit different needs and budgets, as well as ultra-low margins on popular contracts. The brand's award-winning charting software and trading platform also offers a high-degree of customization and superb technical analysis features.
How To Choose Chicago Mercantile Exchange Brokers
Fees
Chicago Mercantile Exchange brokers have different fee structures. Some may charge zero commission when trading CME futures and options, instead imposing a markup on spreads. Other Chicago Mercantile Exchange brokers keep spreads as tight as possible and charge commission.
Interactive Brokers does the latter – its commission on futures is between $0.25 and $0.85 per contract, depending on your trading volume. There is no markup on spreads, although other fees may apply, such as exchange, regulatory and carrying fees for investing in futures and options.
UK traders should aim to pick a broker that has GBP as a base account currency; those that only deal in USD or EUR may charge currency conversion fees on investors looking to deposit funds in GBP.
Other possible fees are deposit and withdrawal charges, Globex Level 1 and Level 2 data fees and account inactivity fees, imposed when an account has been left dormant for a certain period.
Products
With a wide range of assets on the CME, from stocks to commodities, traders should seek firms that offer a large share of products.
NinjaTrader offers index futures, energy futures and crypto futures. Interactive Brokers has equity index futures, fixed-income futures, agriculture futures, currency futures and energy futures. However, more is not always better – some markets may not be suitable for particular strategies, especially if they are relatively illiquid.
Trading Platforms
Many consider the industry-standard trading platforms to be MetaTrader 4 (MT4) and MetaTrader 5 (MT5), although TradingView is another worthy contender. All these platforms can provide access to derivatives products like futures and options.
Some Chicago Mercantile Exchange brokers prefer to use a proprietary trading platform instead. NinjaTrader has its own desktop and web platforms, as well as iOS and Android mobile apps, so investors can access the CME on the go. Its desktop platform is not short on features either, with over 100 indicators, replays of historical futures data and order flow analysis.
Regulation
We recommend choosing a broker that holds a license with a reputable regulator, such as the FCA, which is based in London and commands the trust of industry professionals around the world. DEGIRO is one such broker that has the UK side of its business authorised and regulated by the FCA.
Trading with a regulated broker usually means there is stronger monitoring of the firm’s activities to ensure that the interests of investors are protected. These companies may also offer access to the Financial Services Compensation Scheme, should they become insolvent. The type of regulator can also have an impact on a broker’s freedom when it comes to margin requirements and promotional offers.
Customer Support
Some futures and options markets on the CME operate from Sunday to Friday, meaning support beyond the usual 24/5 may be necessary.
We prefer Chicago Mercantile Exchange brokers that offer 24/7 support, not least because this is often indicative of their wider approach to customer service.
How The Chicago Mercantile Exchange Works
The Chicago Mercantile Exchange Inc., sometimes referred to as the Chicago Merc, is the largest futures exchange in the world. It is part of the CME Group, which has offices in Belfast (UK), Singapore, New York City (NYC, USA) and Bangalore (India), as well as offices and employees in 17 more locations around the world. It is, by definition, a global marketplace.
The CME Group reported revenue of $5bn in 2022, with a significant portion of that coming from clearing and transaction fees. Its current market cap is $70.22bn and it handles around $1,000tn of contracts annually, so Chicago Mercantile Exchange brokers have access to a highly liquid market. It is also one of only three contract markets that are legally allowed to offer binary options in the US.
The board of directors is led by the Chairman and CEO of the CME Group, Terrence Duffy. In October 2022, it was announced that Jonathan Marcus would be Senior Managing Director and General Counsel.
Although trading on the exchange was traditionally carried out physically in the pit on the trading floor (through an open outcry system using hand signals), most investing is now processed electronically, for example through CME’s Globex trading platform. This system allows for high-speed transactions and real-time quotes.
In addition, CME Clearing provides a central counterparty clearing house service.
History
The main points in the history of the Chicago Mercantile Exchange are:
- 1898 – Chicago Butter and Egg Board is founded
- 1919 – Chicago Butter and Egg Board changes into the Chicago Mercantile Exchange
- 1961 – First futures contract (for frozen pork bellies) is launched on the CME
- 1969 – Financial futures and currency contracts are introduced
- 1972 – Interest rate, bond and futures contracts are added to the exchange
- 2002 – CME becomes a publicly-traded corporation
- 2007 – CME merges with the Chicago Board of Trade (CBOT) to form the CME Group (CBOT is another Chicago-based futures exchange)
- 2008 – CME Group purchases the New York Mercantile Exchange (NYMEX) for $8.9bn
- 2017 – Bitcoin (BTC) futures begin trading on the CME
- 2021 – Ethereum (ETH) futures launch
Despite this providing a picture of the exchange’s success, the CME Group has not been free from controversy. It has been at the centre of a lawsuit, which was brought in 2014 by its own members, that claimed the value of their memberships had been negatively impacted by changes made by the CME Group.
For context, membership and seat purchases can be made (for prices that fluctuate) in return for reduced trading fees and other benefits on the exchange.
More detail can be found in the CME rulebook, which contains a whole host of other information from arbitration to CME bylaws.
Products
Chicago Mercantile Exchange brokers have access to four main futures and options markets (stock indices, forex, commodities and interest rates), as well as more niche markets like weather derivatives and real estate futures, where investors can hedge against price movements in buildings and other real estate. Cryptocurrency (Bitcoin and Ether) contracts are also available, although there are no plans to launch a Dogecoin product.
Individual products on the exchange have ticker symbols so they are easily identifiable.
Interest Rate Futures
Interest rate futures contracts can come in various forms, including:
- SOFR futures
- Treasury futures
- Fed Funds futures
- Eurodollar futures
Eurodollar futures and options are an example of a popular instrument offered by some Chicago Mercantile Exchange brokers – they are based on the three-month London Interbank Offered Rate (LIBOR) for US dollars held in foreign banks.
In other words, contracts like these can be used to speculate on future interest rate movements.
Stock Indices Futures
These contracts are futures that track an index like the S&P 500. A popular instrument on the CME is the E-Mini S&P 500 futures contract, which tracks a major global index but each contract is smaller than the standard S&P 500 futures contract. This makes it more accessible to retail traders and is partly why it is a highly liquid market.
S&P 500 Consolidated Futures are not available, although investors can find contracts that track the Nasdaq 100 and other international indices.
Forex Futures
FX futures work the same as other futures contracts – it is agreed that a particular foreign exchange transaction will take place on a specified date at an exchange rate that is determined at the time the contract is created.
Some of the main FX futures that Chicago Mercantile Exchange brokers may offer include:
- EUR/USD
- GBP/USD
- CAD/USD
Other G10 currencies, including the Japanese Yen (JPY) and Australian Dollar (AUD) are available on the exchange – in addition to emerging market pairs.
Commodities Futures
The commodities market is broad and covers many different markets. Although some commodities such as precious metals (gold and silver), natural gas, grains (like corn and wheat futures) and soybean are listed within the CME Group on other exchanges, they are not listed on the Chicago Mercantile Exchange itself. Crude oil (WTI or Brent) prices are not listed on this particular exchange either.
Individual commodities derivatives listed that may be offered by Chicago Mercantile Exchange brokers include:
- Lean hogs
- Pork cutout
- Feeder cattle
- Water futures
- Live cattle (i.e beef)
- Random length lumber (wood)
- Dairy (including milk, butter and cheese futures & options)
Note, prices in commodities markets can be highly volatile, which creates both risks and opportunities.
Opening Hours
Although trading hours offered by Chicago Mercantile Exchange brokers are generally Sunday-Friday, timings vary depending on the particular market being traded. There are also often pre-market sessions.
The timezone of the exchange is CT (GMT-5). Equity index futures, interest rate futures, crypto futures and FX futures have trading hours from Sunday at 17:00 CT until a closing time of 16:00 CT on Friday. There is a 60-minute break each day at 16:00 CT. Hours may vary on agricultural futures products.
The trading session for real estate futures opens on Mondays at 08:15 CT and closes at 15:00 CT each day. There is no trading at the weekend. Weather futures are Sunday-Friday from 17:00 CT until 15:15 CT the next day.
All US-recognised holidays are observed by Chicago Mercantile Exchange brokers for the CME market (either resulting in the market being closed or the hours changing).
Regulation
The Chicago Mercantile Exchange is regulated by the Commodity Futures Trading Commission (CFTC), which regulates all commodities and derivatives in the US. This regulation includes digital assets like Bitcoin that trade on the exchange.
The CFTC aims to protect investors, including those trading at Chicago Mercantile Exchange brokers, and the public from fraudulent and manipulative trading practices and promote sound futures and options markets.
In 1982, a self-regulatory organisation was also created by the futures industry – the National Futures Association (NFA).
Contract Sizes
Derivative contract sizes vary depending on the product. It is important to know the size of the contract so you can calculate the number of contracts that can be bought through Chicago Mercantile Exchange brokers with the capital you have.
One contract of E-mini S&P 500 futures is equivalent to $50 times the value of the index. If the value of the S&P 500 is 4,000, a derivatives contract for the index would be worth $200,000. For Euro FX futures, the contract size is EUR 125,000. If the current exchange rate is 1.20 euros per US dollar, the value of one contract would be $150,000.
Contact Details
The CME has a Global Command Centre that provides customer support 24 hours a day, from 14:00 on Sunday to 16:30 CT (GMT-5) on Friday. The phone number for UK traders is +44 20 7623 4747.
The principal address of the Chicago Mercantile Exchange is 20 South Wacker Drive, Chicago, Illinois, USA. It is not currently possible for individuals to visit the building on a tour and see the trading pit and architecture. Those interested will instead have to resort to a documentary or educational material on the websites of Chicago Mercantile Exchange brokers.
Largest Sectors & Products
We have included a ranking of products on the Globex platform by trading volume below (as of 2023). It shows the dominance of interest rates and equity futures/options.
- Interest Rates (8,513,649)
- Equities (5,649,493)
- Energy (1,932,143)
- Agriculture (1,234,130)
- Forex (849,943)
- Metals (666,410)
The top five individual products by trading volume are:
- Three-Month SOFR Futures (2,714,195)
- E-mini S&P 500 Futures (1,586,487)
- Micro E-mini S&P 500 Index Futures (993,604)
- Micro E-mini Nasdaq-100 Index Futures (907,965)
- E-mini Nasdaq-100 Futures (577,461)
The largest derivatives in markets not included above are:
- Euro FX Futures (186,307)
- Live Cattle Futures (59,474)
- Micro Bitcoin Futures (14,975)
Strategy
We examine some popular examples of fundamental and technical analysis techniques below. However, the best strategies for investing in derivatives at Chicago Mercantile Exchange brokers will often incorporate elements of both.
Fundamental Analysis
Several macroeconomic factors can influence the value of commodities and other derivatives trading on the CME.
Economic growth will generally drive-up commodity prices as their demand increases. The exception is gold, which is often seen as a safe haven asset that investors flock to in times of economic turmoil.
Interest rate decisions of major central banks such as the Federal Reserve will also have an impact on multiple markets, particularly interest rate futures. Other factors that may impact the CME include:
- Weather
- Natural disasters
- Geopolitical instability
- Changes in the US dollar exchange rate (many commodities are denominated in USD even when trading on the international market)
Ultimately, the prices of commodities depend on demand and supply. The factors above can influence demand and supply and, therefore, the price, whether that’s dairy prices (butter, cheese etc.) or another product. If an earthquake occurs in a particular region, this may disrupt the production and transportation of commodities.
Traders must keep up with news reports, use online resources such as videos to understand more about global events and take advantage of the material in the education sections on the websites of Chicago Mercantile Exchange brokers.
One notable resource is the Daily Livestock Report, which can be accessed externally online. As the CME does not list stocks, there is less of a need to scrutinise a particular company’s official financial statements, filings, S&P credit rating or share price – unless this impacts the product you are trading.
Technical Analysis
Technical analysis is popular amongst day traders and swing traders at Chicago Mercantile Exchange brokers. It involves analysing charts and price movement statistics using indicators, different timeframes and drawing tools. Popular indicators include moving averages (simple and exponential), Bollinger Bands and the commodity channel index (CCI).
The CCI measures the current price against a moving average. This enables traders to understand the strength of a particular price movement and what that could mean for future movements.
When the CCI is high, this can suggest that the market is gaining strength. One strategy is for the trader to take a long position when the CCI goes above a value of +100 and then close the position when the value returns below this point.
Traders should also be aware that excessively high values on the CCI could indicate overbought or oversold territory. A value of +200 may indicate that the market is in overbought territory and that there could soon be a price reversal. Strategies like this can be programmed automatically using an investing bot plugged in through an API.
Bottom Line On The Chicago Mercantile Exchange
Chicago Mercantile Exchange brokers provide access to a market with hundreds of underlying assets including commodities, interest rates and forex. The CME is, therefore, an excellent place to speculate on derivatives and hedge. Many traders in the commodities market open and close positions frequently to take advantage of its volatility – this makes checking Chicago Mercantile Exchange brokers’ fees all the more important.
FAQ
Do Chicago Mercantile Exchange Brokers Offer All Commodities?
No. Although the CME Group covers most commodities markets, the Chicago Mercantile Exchange itself covers a smaller selection of commodities, such as lumber and dairy derivatives. Brokers may further restrict what products they offer.
Can I Trade Orange Juice Futures With Chicago Mercantile Exchange Brokers?
Although frozen concentrated orange juice futures do exist (FCOJ-A), they cannot be traded on the CME.
Where Can I Find The Annual Report (10-K) Of The CME Group?
The best place to find the annual report can be found in the Investor Relations section of the CME Group website under Financial Reports & Resources. It can be downloaded as a PDF for easy online viewing.
Is The Chicago Mercantile Exchange Open Today?
Traders can check the calendar on the CME website to see whether the exchange is open today. Hours vary depending on the market and holidays are marked on the calendar.
What Is The Difference Between The CME, CBOT And The NYSE?
Apart from their different logos, the CME is primarily a futures and options exchange whereas the NYSE is best known for being a stock exchange. In 2007, the Chicago Mercantile Exchange & the Chicago Board of Trade merged to become the CME Group. They remain separate exchanges under one umbrella organisation.
Article Sources
Chicago Mercantile Exchange Website