Edge Financial Group: Links to Financial Market Websites

Statistics

According to the Commodity Futures Trading Commission’s 2002 Annual Report, the number of futures contracts traded in the U.S. was as follows:
Year
2000 – 477,760,141
2001 – 581,132,590
2002 – 790,072,208— Commodity Futures Trading Commission

According to the Commodity Futures Trading Commission’s 2002 Annual Report, the number of options traded in the U.S. was as follows:
Year
2000 – 102,579,828
2001 – 141,550,871
2002 – 213,994,986 — Commodity Futures Trading Commission

Futures and options trading volume worldwide reached new record levels in 2002, according to data the Futures Industry Association gathered from 56 exchanges. In 2002, 5.99 billion contracts were traded, up 36.8% from 2001. — Dow Jones Newswires

The dollar value of futures contracts traded currently exceeds several fold the dollar value of common stocks traded on all U.S. stock exchanges. — National Futures Association

Futures Total Exchange Volume on the New York Mercantile Exchange for 2003:
Year Daily Average Annual Volume
2003 (Thru Nov) 434,400 99,477,631

Option Total Exchange Volume on the New York Mercantile Exchange for 2003:
Year Daily Average Annual Volume
2003 (Thru Nov) 101,923 23,340,289
— New York Mercantile Exchange

After watching trading proceed on an exchange floor for a while, you can appreciate the tremendous speed with which buyers and sellers make their bids and offers, and the speed and accuracy with which the trades are executed. For example, on the New York Mercantile Exchange about 1,000 contracts are bought and sold each minute. — New York Mercantile Exchange

The S&P 500® stock index futures contract traded 3,963 contracts on its first day of trading on April 21, 1982 – at the time, a Chicago Mercantile Exchange (CME) record for first-day volume. In 2002, average daily volume was more than 94,000, making it the third most-traded contract at CME, following first place Eurodollars and second place E-mini™ S&P 500. — Chicago Mercantile Exchange

The E-mini S&P 500 – a smaller version of the regular contract designed for individual traders and traded electronically – averaged an astounding 459,292 contracts traded daily for 2002. — Chicago Mercantile Exchange

In 1970, 13 million futures contracts traded at the Chicago Mercantile Exchange. In 2002, that number had risen to 558 million. — Chicago Mercantile Exchange

In 2003 the Chicago Mercantile Exchange posted total 2003 annual volume of more than 640 million contracts, up 15 percent from 2002, as it posted double-digit volume gains for the fourth consecutive year. — Chicago Mercantile Exchange

The notional value, or underlying dollar value, of transactions on the Chicago Mercantile Exchange in 2003 represented $333.7 trillion in asset allocation and risk management activity. — Chicago Mercantile Exchange

In 1982, the first year that options traded (on T-Bond futures at the Chicago Board of Trade), only 177,350 options contracts were traded. Look at the growth that followed.
Options Contracts Traded (Numbers Rounded)
Year
1985 20 million
1990 64 million
2002 114 million — Chicago Mercantile Exchange

Trading volume for 2003 at the Chicago Board Options Exchange (CBOE), the world's largest options exchange, totaled 283,946,495 contracts, a rise of 6% when compared to the year-ago level. The 283 million contracts traded in 2003 represented the third highest annual volume figure in CBOE history. — Chicago Board Options Exchange

History

Although the first recorded instance of futures trading occurred with rice in 17th Century Japan, there is some evidence that there may also have been rice futures traded in China as long as 6,000 years ago. — Bruce Babcock

Starting around the middle of the 19th century in the United States, businessmen began organizing market forums to make the buying and selling of commodities easier. These central marketplaces provided a place for buyers and sellers — such as farmers and grain dealers — to meet, set quality and quantity standards, and establish rules of business. — New York Mercantile Exchange

Over a period of about 50 years - from the mid- to late-19th century - about 1,600 exchanges had sprung up across the United States, mostly at major railheads, inland water ports, and seaports. — New York Mercantile Exchange

Although futures trading had been developing at the New York Mercantile Exchange since the turn of the century, transactions were predominantly for physical product until the 1960s. In order to accommodate the cash market, samples of the product were displayed on the premises, with actual stock stored nearby. — New York Mercantile Exchange

In 1865 the Chicago Board of Trade formalized grain trading by developing standardized agreements called "futures contracts." — Chicago Board of Trade

In 1865 the Chicago Board of Trade also began requiring performance bonds called "margin" to be posted by buyers and sellers in its grain markets. — Chicago Board of Trade

In 1866 the first transatlantic cable was completed. The time required to send messages to Europe from Chicago was reduced from three days to three hours. — Chicago Board of Trade

In 1877 futures trading became more formalized and "speculators" entered the picture. — Chicago Board of Trade

In 1925 Western Union installed an automatic ticker to replace slower Morse service for improved quotation system at the Chicago Board of Trade. — Chicago Board of Trade

In 1925, the Board of Directors at the Chicago Board of Trade were given authority to declare an emergency situation and establish daily price limitations. — Chicago Board of Trade

In 1956 the Chicago Board of Trade introduced the industry's first examination for commodity brokers. — Chicago Board of Trade

In 1967 new electronic price display boards were installed on the walls above the trading floors. Price reporting time was cut to seconds. — Chicago Board of Trade

In 1975 the Chicago Board of Trade launched the first financial futures instrument; futures on the Government National Mortgage Association mortgaged-backed certificates, or GNMAs. — Chicago Board of Trade

In 1982 the Chicago Board of Trade launched options on U.S. Treasury bond futures; the success of this contract opened the way for options on other financial futures contracts as well as agricultural futures contracts. — Chicago Board of Trade

The Eurodollar futures contract was introduced at the Chicago Mercantile Exchange in 1981 and was the first futures product to be settled in cash, rather than by physical delivery of the underlying item. — Chicago Mercantile Exchange

The Eurodollar is now the world's most actively traded futures contract and a benchmark for measuring the relative value of U.S. dollar-denominated short-term fixed-income securities. — Chicago Mercantile Exchange

In 1984, trading in agricultural options on futures began as the Chicago Board of Trade launched options on Soybeans futures. — Chicago Board of Trade

Of the more than a thousand commodity exchanges that existed in the United States about 100 years ago, only nine exist today. — New York Mercantile Exchange

Facts About Exchanges

The New York Mercantile Exchange, Inc., is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals. — New York Mercantile Exchange

Trading at the New York Mercantile Exchange is conducted through two divisions, the NYMEX Division, home to the energy, platinum, and palladium markets; and the COMEX Division, on which all other metals trade. — New York Mercantile Exchange

The New York Mercantile Exchange has held five names over the course of its 131-year history (it was founded in 1872): the Butter and Cheese Exchange; the American Exchange; the Butter, Cheese, and Egg Exchange; the New York Mercantile Exchange; and, after converting to a for-profit membership structure in 2000, the New York Mercantile Exchange, Inc. — New York Mercantile Exchange

Introduced in 1956, the New York Mercantile Exchange’s platinum contract is the longest continuously traded precious metals contract in the world’s marketplace. — New York Mercantile Exchange

The New York Mercantile Exchange headquarters building at the World Financial Center is 16 stories high and 500,000 square feet. The building features two three-story 25,000-square-foot trading floors. — New York Mercantile Exchange

Each day, billions of dollars worth of energy products, precious metals, and other commodities are bought and sold on the trading floor of the New York Mercantile Exchange.

In 1848, to meet the need for a central marketplace, the Chicago Board of Trade (CBOT®) was founded by 82 Chicago merchants, and settled into its first home above the Gage and Haines flour store at 101 S. Water Street where it will met until 1852. — Chicago Board of Trade

The Chicago Butter and Egg Board was founded in 1898 and evolved into the Chicago Mercantile Exchange in 1919. — Chicago Mercantile Exchange

Chicago Mercantile Exchange Inc., (CME) is the largest futures exchange in the United States and the second largest exchange in the world for the trading of futures and options on futures. — Chicago Mercantile Exchange

The Chicago Mercantile Exchange became the first publicly traded U.S. financial exchange in December 2002 when the Class A shares of its parent company, Chicago Mercantile Exchange Holdings Inc., began trading on the New York Stock Exchange under the ticker symbol CME. — Chicago Mercantile Exchange

CME has the largest futures and options on futures open interest of any exchange in the world. — Chicago Mercantile Exchange

The Kansas City Board of Trade was formally chartered in 1876. More than a century after being formed, ten billion bushels of wheat would change hands on the KCBT exchange in one year. — Kansas City Board of Trade

As with futures trading, most of the options on futures contracts traded in the U.S. occur on the Chicago futures exchanges. The CBOT, CME and the MidAmerica Commodity Exchange trade over 85% of all options on futures traded in the country. Almost 15% are traded at New York exchanges. — Chicago Mercantile Exchange

The Minneapolis Grain Exchange is a major center for Wheat futures. The annual volume of contracts traded of Spring Wheat Futures in 2002 was 1,199,149. The annual volume of Spring Wheat Options traded in 2002 was 61,086. — Minneapolis Grain Exchange

Commodity exchanges have been established around the world. A partial listing includes Argentina, Australia, Austria, Brazil, Bulgaria, Hungary, China, India, Japan, Korea, New Zealand, Singapore, South Africa, Turkmenistan, the United Kingdom, and of course the United States. — Wall Street Executive Library (Rutgers University)

The United Kingdom has three commodity exchanges. The International Petroleum Exchange deals with Brent and Dubai Crude Oil, Gas Oil, Leaded and Unleaded Gasoline, etc. The Futures and Options Exchange (which includes the former London Commodity Exchange), is the leading exchange in Europe for soft commodities (such as Cocoa, Coffee, Rubber, and Grains). The London Metal Exchange deals in a variety of ferrous and non-ferrous metals traded around the world. — Wall Street Executive Library (Rutgers University)

Winnipeg Commodity Exchange Inc. is Canada’s only agricultural futures and options exchange. Products traded include futures contracts and options on Canola, Flaxseed, Feed Wheat, and Feed Barley. Canola is its most actively traded commodity. Winnipeg Commodity Exchange is the world’s only futures market for flaxseed. — Winnipeg Commodity Exchange

Singapore is the world’s largest natural rubber trading center and the Singapore Commodity Exchange is a major market for rubber futures, which began trading in the 1920s. — Singapore Commodity Exchange

Vienna’s general Commodity Exchange founded in 1872 was joined with the Vienna Stock Exchange to form the Vienna Stock and Commodity Exchange in 1876. Ever since, the Wiener Börse has had two departments; the Stock Exchange and the Commodity Exchange. — Wiener Börse AG

Presently, trading sessions of Vienna Commodity Exchange are being held for raw skins and hides, leather, driving belts, technical leather products, and timber. — Wiener Börse AG

At the Vienna Commodity Exchange, prices are regularly fixed by Price Committees for these products and published in the Official List of the Vienna Commodity Exchange that comes out in two parts. These Official Lists are important sources of information on current trading prices for merchants. — Wiener Börse AG

The Sofia Commodity Exchange (SCE) is the first and the largest organized, concentrated, and fast-liquidity exchange market in Bulgaria. — Sofia Commodity Exchange

Commodities traded on the Sofia Commodity Exchange include Milling Wheat, Feed Wheat, Forage Barley, Malting Barley, Corn, Black Sunflower and White Beans. — Sofia Commodity Exchange

The world’s most actively traded of all contracts is the Korea Stock Exchange’s KOSPI 200 stock index option. Its volume this year reached 1.89 billion contracts, up 129.6% from the prior year. — Dow Jones Newswire

Sydney Futures Exchange Limited is the 10th largest financial futures and options exchange in the world by volume turnover and the second largest in the Asia Pacific region. — Sydney Futures Exchange Limited

Sydney Futures Exchange Limited provides futures and options on the four most actively traded markets - interest rates, equities, currencies and commodities, with a number of its flagship products ranked in the world's top ten most actively traded products in their market sector. — Sydney Futures Exchange Limited

Commodity products traded on the Sydney Futures Exchange are Greasy Wool futures and options, Fine Wool futures, and Broad Wool futures. — Sydney Futures Exchange Limited

About Commodity Trading

Futures contracts are traded at a futures exchange and only at a futures exchange. U.S. exchanges provide a place to trade, formulate rules for trading, and supervise trading practices. — Chicago Mercantile Exchange

Many exchanges follow the same procedure. For example, the heart of recording a trade on the NYMEX Division lies in the blizzard of pit cards tossed to the center of the rings. When a trade is executed, each selling broker must record each transaction on a card about the size of an index card which shows the commodity, quantity, delivery month, price, broker's badge name and that of the buyer. The pit card must be tossed into the center of the trading ring within one minute of the completion of a transaction. — New York Mercantile Exchange

One of the most important functions of a futures exchange is to provide a clearing operation. At the Chicago Mercantile Exchange, for example, this operation is called the Clearing House. The Clearing House is responsible for clearing trades and for the day-to-day settlement. This means the Clearing House records all of the trades made through CME’s facilities each day. At the end of the trading session, the Clearing House matches or reconciles contracts bought and sold. — Chicago Mercantile Exchange

The Clearing House also settles traders’ accounts to the market each trading session. This is called “marked-to-market,” and means that your account is credited or debited based on that session's gains or losses. As prices move for or against your position, funds flow into and out of your trading account. — Chicago Mercantile Exchange

Daily Cash Settlement: As futures prices move upward and downward, the market value of customers' open positions increases and decreases. Resulting gains and losses from futures trading are credited or charged to each customer's account each day following the close of trading. Subject to existing margin requirements, all gains deposited to a customer's account through this procedure become immediately available to the customer. — National Futures Association

Margin Requirements: Buyers and sellers of futures contracts are required to at all times maintain sufficient funds on deposit in their brokerage accounts to cover losses that might be incurred as a result of price changes. — National Futures Association

Margin deposits provide protection for all market participants. In volatile markets, the exchanges increase margin requirements accordingly. The availability of such funds is what makes daily cash settlements possible under all market conditions. — National Futures Association

The Exchange Clearing Houses: Once each purchase of a futures contract is precisely matched to the corresponding sale (a process which occurs each day), the clearing organization of the exchange where the contracts are traded becomes the "buyer to every seller and the seller to every buyer." The purpose: provide a mechanism that assures the payment of all gains and collection of all losses on a daily basis. — National Futures Association

Capital Requirements: Every firm that conducts business with the public as a Futures Commission Merchant must have and maintain sufficient capital to meet its financial obligations to its customers. These requirements are subject to continuous audit and stringent enforcement. Regulatory agencies have the authority to determine compliance on a daily basis and in volatile markets clearing organization can demand that a firm provide additional capital on one hour's notice! — National Futures Association

Segregated Accounts: Firms and principals of firms in the futures industry are required to maintain their customers' funds and margin deposits in bank accounts which are totally separate from their own. Rules further stipulate that such funds can be used only for the purposes the customers intended and can at no time be commingled with the firm's funds or the funds of the firm's principals. Compliance is strictly enforced and regulators possess power to take such immediate action as is considered necessary to protect the security of customers' money. — National Futures Association

It is important to realize that the Exchange does not set the prices of the traded commodities. The prices are determined in an open and continuous auction on the Exchange floor by the members who are acting on behalf of their customers, the companies they represent, or themselves. The process of the auction is called open outcry. A strong or distinctive voice is a must for a trader. — New York Mercantile Exchange

A big difference between a typical auction, where a single auctioneer announces the bids, and the Exchange is that people are not only competing to buy but also to sell. — New York Mercantile Exchange

The wonderful thing about open outcry, which also contributes to its apparent chaos, is that only the best bid and offer are allowed to come forward. If a trader is willing to pay the highest price offered, he announces that to the other traders, and all lower bids are silenced. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than someone else's lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. — New York Mercantile Exchange

Fun Facts

Why we call them bulls and bears: “Bear” was the earlier of the two designations. Back in Bailey’s English Dictionary of 1720, we find the definition, “to sell a bear: to sell what one hath not.” The allusion here is to an old proverb, “to sell the bear-skin before the bear is caught.” The origin of “bull,” used in this sense prior to 1720, is not positively known. It is probable, however, that it was adopted through the long association of the two words, bear and bull, in the old English sports of bearbaiting and bullbaiting. — A Hog on Ice (and Other Curious Expressions) by Charles Earle Funk

A market will flourish for almost any commodity as long as there is an active pool of buyers and sellers. Cat pelts were once a hot item in St. Louis — New York Mercantile Exchange

Today dried cocoons are a major exchange-traded commodity in Japan. — New York Mercantile Exchange

Until 1977, when market prices were first posted electronically to wallboards, chalkboards were used to display the information. Ambidextrous board boys made a higher wage. — New York Mercantile Exchange

Floor traders often don't know each other by given name but by the bright yellow or green badges that display their personally chosen floor names. OIL, OPEC, DOLR, ESPN, GOAL, ID, EGO, BOOM, LOUD, TALK, MILK, NYC, TAXI, NOSE, TV, ZEN, and ZEUS are all traders on the Exchange. — New York Mercantile Exchange

How much of what is traded actually gets delivered? It is estimated that typically four percent or less is actually delivered. A contract may be bought and sold many times before the delivery date as businesses attempt to manage their risk. This is what accounts for the large volume traded, though relatively little is delivered, since the basic purpose of a futures contract is to provide price-change protection. — Chicago Board of Trade

Trading areas are called "pits" because each "pit" is a raised platform with descending steps on the inside that permit buyers and sellers to see each other. It also allows a customer's orders to move into the "pit" quickly. — Chicago Board of Trade

The octagonal pit shape actually makes the trading orderly. Each side of the octagon forms a "pie slice" in the pit. All the traders dealing with a certain delivery month (September, for example) trade in the same "pie slice"-shaped section of a pit. — Chicago Board of Trade

Brokers, who work for institutions and/or the general public typically stand at the edges of the trading pit. From this position, they can easily see other traders and have easy access to their runners (who bring orders from phone booths) and an unobstructed view of the firm's trading booths, from which they may receive flashed orders. The locals, who trade only for themselves, typically stand in the center of the pit. — Chicago Board of Trade

There's a pit for each commodity traded. For example, the Chicago Mercantile Exchange has a lumber trading pit, a Eurodollar trading pit, an S&P 500® trading pit, and so on. — Chicago Mercantile Exchange

Trading is conducted through a public auction system. There is no central auctioneer; each trader plays that role for himself. — Chicago Board of Trade

Open outcry is an efficient means of “price discovery,” allowing buyers and sellers to arrive at the best prices given the supply and demand for a given futures or options product. — Chicago Mercantile Exchange

Through open outcry, the trader shouts the quantity of the commodity he is buying or selling, and the corresponding price he wants. — Chicago Board of Trade

Hand signals are a specialized sign language which clarify the traders’ verbal bids and offers, particularly when trading is highly active. A trader with his palm facing inward signals a wish to buy; one with his palm outward signals a wish to sell. Each finger held vertically indicates quantity. Fingers extended horizontally express the price at which the bid or offer is made. — Chicago Board of Trade

The Chicago Mercantile Exchange was the first exchange to trade a contract on a living animal – Live Cattle futures. The contract opened on November 30, 1964, at $24.00 with a volume of 117 contracts. — Chicago Mercantile Exchange

On any given day, about 6,000 people are on the Chicago Mercantile Exchange’s two trading floors including traders, firm employees and CME employees. — Chicago Mercantile Exchange

It takes approximately 100 gallons of floor wax to treat each of CME’s trading floors. Each floor is stripped and waxed four times a year. — Chicago Mercantile Exchange

Security and Regulation

How do you know the other party will pay for what he bought? It is the Exchange's job to guarantee each trade, ultimately acting as the seller to every buyer and the buyer to every seller. At the New York Mercantile Exchange, this is accomplished through a group of about 60 or 70 member firms called clearing members, who include some of the largest and best capitalized names in the banking and financial services industries. — New York Mercantile Exchange

The Exchange does not take positions in the market, nor does it even advise people on what positions to take. Instead, it has the responsibility to ensure that the market is fair and orderly. It does this by setting and enforcing rules regarding margin deposits, trading and delivery procedures, membership qualifications, and other aspects of trading. — New York Mercantile Exchange

Members who violate the rules of the Exchange can be subject to fines or other sanctions. Looking over the Exchange's shoulder is the Commodity Futures Trading Commission, a U.S. government agency. — New York Mercantile Exchange

Futures and options on futures markets in the United States are regulated at three levels: the federal government, an industry organization sanctioned by the government, and individual exchanges. — Chicago Mercantile Exchange

Federal law started regulating futures trading in 1923. — Chicago Mercantile Exchange

The Trade Commission Act of 1974 created the Commodity Futures Trading Commission (CFTC), an independent federal body that oversees all futures trading. — Chicago Mercantile Exchange

The CFTC has authorized the National Futures Association (NFA), formed in 1982, to handle the registration and licensing of all industry participants who are exchange members, who as brokerage firm employees have contact with the public, or who manage a public customer’s trading account. — Chicago Mercantile Exchange

As and example of the type of financial safeguards implemented by an exchange, the Chicago Mercantile Exchange closely monitors trading activities and the financial condition of its member firms. — Chicago Mercantile Exchange

Chicago Mercantile Exchange uses sophisticated risk management and financial surveillance techniques to protect Exchange members and customers from default on futures and options on futures contracts. — Chicago Mercantile Exchange

The Chicago Mercantile Exchange Clearing House guarantees contract performance. The Clearing House acts as the counterparty to every trade (the seller to every buyer and the buyer to every seller), thus ensuring the integrity of all trades and guaranteeing contract performance. — Chicago Mercantile Exchange

The Chicago Mercantile Exchange is financially backed by its clearing members as well as a special Trust Fund. — Chicago Mercantile Exchange

Due to its combined safeguards, no Chicago Mercantile Exchange customer has ever suffered a loss of contract-related funds due to the failure of one of the Exchange’s member firms. — Chicago Mercantile Exchange

A requisite for the growth of the futures markets has been their financial integrity. While trading in futures contracts obviously involves risks related to price changes, market participants have historically had little reason to be concerned about the security of their funds. Customer losses due to the insolvency of a futures brokerage firm have been virtually non-existent. Indeed, such losses have totaled less over 50 years than the Securities Investor Protection Corporation has paid, on the average, to reimburse customers of the securities industry for member firm insolvency losses each year. — National Futures Association