The Chicago Board of Trade (CBOT), is an American futures and options exchange that was founded in 1848. On July 12, 2007, the CBOT merged with the

Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is an American derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board ...

(CME) to form

CME Group CME Group Inc. is an American financial services company based in Chicago that operates financial derivatives exchanges including the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, and the Commodity Exchange. ...

. CBOT and three other exchanges (CME, NYMEX, and COMEX) now operate as designated contract markets (DCM) of the CME Group.

History

The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. It was created as a centralized venue where buyers and sellers could meet to negotiate and formalize forward contracts. The idea originated from a conversation between Thomas Richmond and W. L. Whiting, who discussed the potential benefits of forming a board of trade. Their exchange led to a March 13 meeting of merchants and businessmen who supported the initiative, resulting in a resolution to create the institution and draft a constitution. A committee was then formed to develop bylaws, which were officially adopted by 82 charter members on the first Monday of April. This development emerged from broader concerns among U.S. merchants about ensuring the availability of reliable markets for commodity exchange. To address these challenges, they had turned to forward contracts, though credit risk remained a persistent issue – one that the CBOT was specifically designed to help manage. In 1864, the CBOT listed the first standardized "exchange traded" forward contracts, which were called

futures contract In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item tr ...

s. In 1919, the Chicago Butter and Egg Board, a spin-off of the CBOT, was reorganized to enable member traders to allow future trading, and its name was changed to Chicago Mercantile Exchange (CME). The Board's restrictions on trading after hours on any prices other than those at the Board's close gave rise to a 1917 legal challenge, the '' Chicago Board of Trade v. United States.'' The

U.S. Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that turn on question ...

held that language of the

Sherman Antitrust Act of 1890 The Sherman Antitrust Act of 1890 (, ) is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce and consequently prohibits unfair monopolies. It was passed by Congress and is named for S ...

– which outlawed "every contract ... in restraint of trade" – should not be taken literally, but rather should be interpreted under a "rule of reason". On October 19, 2005, the

initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investm ...

of 3,191,489 CBOT shares was priced at $54.00 a share. On its first day of trading the stock closed up 49% at $80.50 on the

NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District, Manhattan, Financial District of Lower Manhattan in New York City. It is the List of stock exchanges, largest stock excha ...

. In 2007, the CBOT and the Chicago Mercantile Exchange merged to form the CME Group.

Chicago Board of Trade Building

Since 1930, the Chicago Board of Trade has been operating out of 141 West Jackson Boulevard, Chicago. The building was designed by

Holabird & Root The architectural firm now known as Holabird & Root was founded in Chicago in 1880. Over the years, the firm has changed its name several times and adapted to the architectural style then current — from Chicago School to Art Deco to Moder ...

and is 605 feet (184m) tall, the tallest in Chicago until the Richard J. Daley Center superseded it in 1965. The

Art Deco Art Deco, short for the French (), is a style of visual arts, architecture, and product design that first Art Deco in Paris, appeared in Paris in the 1910s just before World War I and flourished in the United States and Europe during the 1920 ...

building incorporates sculptural work by Alvin Meyer and is capped by a 31-foot-high (9.5 m) statue of the Roman goddess Ceres in reference to the exchange's role in trading grain. It has been claimed that the statue was left faceless because its sculptor, John Storrs, thought that no one would ever be able to see the face on top of a forty-five-floor skyscraper. However, it may be that the smooth surface of the aluminium statue is an element of the streamlined look of Art Deco. In 1977, the CBOT building was designated a Chicago Landmark and a

National Historic Landmark A National Historic Landmark (NHL) is a National Register of Historic Places property types, building, district, object, site, or structure that is officially recognized by the Federal government of the United States, United States government f ...

the following year. It is now one of many

skyscraper A skyscraper is a tall continuously habitable building having multiple floors. Most modern sources define skyscrapers as being at least or in height, though there is no universally accepted definition, other than being very tall high-rise bui ...

s in the city's Loop commercial district.

Trading platforms

The Pit

The pit is a raised

octagon In geometry, an octagon () is an eight-sided polygon or 8-gon. A '' regular octagon'' has Schläfli symbol and can also be constructed as a quasiregular truncated square, t, which alternates two types of edges. A truncated octagon, t is a ...

al structure where open-outcry trading takes place. Operating during regular trading hours (RTH), the CBOT trading floor contains many such pits. The steps up on the outside of the

and the steps down on the inside give the pit something of the appearance of an amphitheater, and allow hundreds of traders to see and hear each other during trading hours. The importance of the pit and pit trading is emphasized by the use of a stylized pit as the logo of the CBOT. ''The Pit: a story of Chicago'' is also the title and subject of a 1903 novel by

Frank Norris Benjamin Franklin Norris Jr. (March 5, 1870 – October 25, 1902) was an American journalist and novelist during the Progressive Era, whose fiction was predominantly in the naturalism (literature), naturalist genre. His notable works include ''M ...

. Trades are made in the pits by bidding or offering a price and quantity of contracts, depending on the intention to buy (bid) or sell (offer). This is generally done by using a physical representation of a trader's intentions with his hands. If a trader wants to buy ten contracts at a price of eight, for example, in the pit he would yell "8 for 10", stating price before quantity, and turn his palm toward his face, putting his index finger to his forehead denoting ten; if he were to be buying one, he would place his index finger on his chin. If the trader wants to sell five contracts at a price of eight, they would yell "5 at 8", stating quantity before price, and show one hand with palm facing outward, showing 5 fingers. The combination of hand-signals and vocal representation between the way a trader expresses bids and offers is a protection against misinterpretation by other market participants. For historical purposes, an illustrated project to record the hand signal language used in CBOT's trading pits has been compiled and published. With the rise of electronic trading, the importance of the pit has decreased substantially for many contracts, though the pit remains the best place to get complex option spreads filled. In 2015, the Chicago Board of Trade officially eliminated the use of open outcry in all agricultural products in favor of electronic trading, a controversial move that angered some long-time traders.

News lines

* On August 1, 1974, trading at the Chicago Board of Trade was halted after an anonymous caller said a bomb had been placed in the building. * On October 22, 1981, trading was halted on the CBOT and the

Philadelphia Stock Exchange Philadelphia Stock Exchange (PHLX), now known as Nasdaq PHLX, is the first stock exchange established in the United States and the oldest stock exchange in the nation. The exchange is owned by Nasdaq, which acquired it in 2007 for $652 million, ...

after anonymous callers said bombs had been placed in those buildings. * On August 1, 2006, the CBOT launched side-by-side trading for agricultural futures. Orders could be traded electronically or placed by pit traders using open outcry, creating a single pool of

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quic ...

. * On October 17, 2006, the Chicago Mercantile Exchange announced the purchase of the Chicago Board of Trade for $8 billion in stock, joining the two institutions as CME Group, Inc. * On July 9, 2007, the announced merger with the

was approved by CBOT shareholders, "creating the largest derivatives market ever."

References

Notes Bibliography * Michael Durica (2006). ''Product Development for Electronic Derivative Exchanges: The case of the German Ifo business climate index as underlying for exchange traded derivatives to hedge business cycle risk''. Pro Business. Berlin. . * Oliver Ryan (Nov. 14, 2005). "Chicago's Making A Contracts Killing". ''Fortune'', p. 22. Further reading * * * Cari Lynn (2004). ''Leg the Spread: A Woman's Adventures Inside the Trillion-Dollar Boys' Club of Commodities Trading''. Random House/Broadway

External links

Chicago Board of Trade

Inside Chicago Walking Tours
The CBOT and other Chicago buildings
The CME Group Collections at University of Illinois at Chicago

TradingPitHistory.com
A website to preserve the trading pit hand signals used at CBOT

* ttp://www.cmegroup.com/ CME Group
Commodities trader at the Chicago Board of Trade

News on the merger: Chicago bulls
{{DEFAULTSORT:Chicago Board Of Trade Commodity exchanges in the United States Companies based in Chicago Economy of Chicago 1848 establishments in Illinois Futures exchanges Financial regulatory authorities of the United States