Chicago Board of Trade
From Wikipedia, the free encyclopedia
| Chicago Board of Trade | |
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| Type | Public (NYSE: BOT) |
|---|---|
| Founded | 1848 |
| Headquarters | Chicago, Illinois |
| Key people | Bernard W. Dan, President & CEO Charles P. Carey, Chairman |
| Industry | Business Services |
| Products | Options/Futures exchange |
| Revenue | $532 millionUSD (2005) |
| Employees | 673 |
| Website | www.cbot.com |
The Chicago Board of Trade (CBOT) NYSE: BOT, established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million contracts. On 17th October 2006 the CBOT merged with the Chicago Mercantile Exchange.
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[edit] History
The concerns of U.S. merchants to ensure that there were buyers and sellers for commodities have resulted into forward contracts to sell and buy commodities. Still, credit risk remained a serious problem. The CBOT took shape to provide a centralized location, where buyers and sellers may meet and negotiate and formalize forward contracts.
In 1865, the CBOT listed the first ever standardized “exchange traded” forward contracts, which were called futures contracts. In 1919, the Chicago Butter and Egg Board[1], 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).
On 19 October 2005 the initial public offering (IPO) of 3,191,489 CBOT shares was priced at $54.00 (USD) per share. On its first day of trading the stock closed up +49% at $80.50 (USD) on the NYSE.
[edit] The Building
Since 1930, the Chicago Board of Trade has been operating out of 141 West Jackson Boulevard, Chicago. It is housed in a building designed by architects Holabird & Root and it is 605 feet tall. This Art Deco building incorporates sculptural work by Alvin Meyer and is capped by a statue of the goddess Ceres in reference to the exchange's heritage as a commodity market. Ceres is faceless because its sculptor, John H. Storrs, believed that the forty-five story building would be sufficiently taller than any other nearby structure and as a result that no one would be able to see the sculpture's face anyway.
On 4 May 1977, the Chicago Board of Trade Building was designated a Chicago Landmark[2]. Today the Board of Trade Building is closely joined by numerous skyscrapers in the heart of Chicago's busy Loop commercial neighborhood. The building was featured as the headquarters of the fictional Wayne Enterprises in the 2005 film Batman Begins.
[edit] The Pit
The pit is a raised octangonal structure where open-outcry trading takes place. The steps up on the outside of the octagon 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 the pit and pit trading is emphasized by the use of a stylized pit as the logo of the CBOT. "The Pit" is also the title and subject of a classic novel ([1903]) by Frank Norris [3].
Trades are made in the pit 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 hands inward toward his face, showing all 10 fingers. 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 the 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.
[edit] News lines
- On October 22, 1981, trading was halted on the Chicago Board of Trade and the Philadelphia Stock Exchange 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 made electronically can now be placed by pit traders using open outcry, creating a single pool of liquidity and moving closer towards an electronically driven exchange like the Chicago Mercantile Exchange.
- On October 17, 2006, the Chicago Mercantile Exchange announced the purchase of the Chicago Board of Trade for $8 billion in stock, rejoining the two financial institutions as CME Group, Inc. CBOT currently uses outsourced technology platforms, but will move to CME's Globex trading system. This will provide much of the merger's anticipated savings. The merger will also strengthen the combined group's position in the global derivatives market.
[edit] See also
[edit] References
- Durica, Dr. Michael (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. ISBN 10: 3-939533-05-X.
- Ryan, Oliver (Nov. 14, 2005). "Chicago's Making A Contracts Killing". FORTUNE, p. 22.
