“CME is the world’s largest owner and operator of exchanges and clearinghouses for financial derivatives, and the first financial exchange to become publicly traded” (Reuters, 2012). CME Group was formed in 2007 with the merging of Chicago Mercantile Exchange and the Chicago Board of Trade. Today the company is comprised of four designated contract markets (DCMs); Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), New York Mercantile Exchange (NYMEX) and Commodity Exchange (COMEX) (Chicago Mercantile Group, 2012) .Together they embrace one vision, to grow globally by redeveloping stronger platforms that keep them in sync with today’s technology. Helping the World Advance is their motto.
CME’s Superior Trading Technology should be noted as their first organization strength. Their business soared when they introduced their advanced electronic trading platforms ‘Globex’. CME offered trading virtually 24 hours a day throughout the trading week – more than any other exchange in the world. There are more than 1100 direct customer connections to CME Globex, as well as six telecommunications hubs in key financial centers in Europe and Asia. These hubs provide non-U.S. customers with reduced connectivity costs and fast, efficient access to our electronic markets (CME Group/Chicago Board of Trade Company, 2012).
Beyond a shadow of a doubt, the reason this is considered a strength for CME. Electronic trading systems have changed the face of the exchange-traded derivatives industry on a scale that was virtually unimaginable 20 years ago. The advantages of electronic trading include ease of access from virtually anywhere worldwide almost 24 hours a day, speed, efficiency and lower costs (CME Group/Chicago Board of Trade Company, 2012).
CME has always had a competitive advantage. Why, it was with this in mind that the concept for an electronic trading platform was conceived by CME Group leadership in 1987 as a “low-impact” means of providing 24-hour market coverage. One example where round-the-clock coverage had an immediate impact was in interbank currency trading. Its epicenter is in London where much trade is concluded while traders in Chicago are asleep. If CME Group could see increased order flows through electronic trading, market participants could experience increased liquidity during these hours (Labuszewski, 2012). CME’s markets were fair, transparent and anonymous, and our electronic trading platform offers the same marketplace for all participants. Individual investors, hedge funds and large institutions alike see and have access to the same prices with complete anonymity in all bids, offers and execution reports (CME Group/Chicago Board of Trade Company, 2012).
CME is a proven leader in product innovation; they offer the widest range of products available on any exchange which make this their second organizational strength. They include products based on the entire U.S. Interest rate yield curve, equity indexes, foreign exchange, commodities, energy and alternative investment products such as weather and real estate. Many of our largest contracts serve as benchmarks for investors worldwide. CME Group has driven its rapid expansion by expanded contract offerings and the proliferation of its electronic CME Globex platform. However, the volume of trading conducted through exchanges owned and operated by CME Group is dwarfed by the over the counter exchange of key Interest Rates (CME Group/Chicago Board of Trade Company, 2012).
CME continues to maintain the competitive advantage when they expanded the trading hours for its CBOT grain and oilseed futures from 17 to 21 hrs and then agreeing to buy a small rival Kansas City Exchange. One reason for expanding its trading hours and control of the wheat market at a time when it’s overall trading volume has dropped. CME Chairman Terry Duffy said in an interview, “The wheat contracts are “complementary…