CME Group. The highest trading league. Everything you need to know about Chicago exchanges

CME Group. The highest trading league. Everything you need to know about Chicago exchanges

Beginner traders have a lot of various questions about the Chicago exchange, CME Group and futures trading in Chicago. This longread was written exactly for the purpose of answering these questions as completely and correctly as possible. However, first of all, you need to understand what the Chicago futures exchange or CME is.

The matter is that historically there are several major exchanges in Chicago:

  1. Chicago Board Of Trade (CBOT) was founded in 1848.
  2. Chicago Mercantile Exchange (CME) was founded in 1874.
  3. Chicago Stock Exchange (CHX) was founded in 1882. It trades stocks of 3,500 companies. It was taken over by the Intercontinental Exchange (ICE) in 2018.

CBOT and CME united in 2007 and formed the CME Group, which was joined by the New York Mercantile Exchange (NYMEX) one year later.

Thus, the CME Group became the leading platform for derivative trading and today the trading volume accounts for billions of dollars a month in each sector.

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CME Group

This article is about the CME Group, perhaps, the biggest and most influential organisation in the world of exchange futures. This platform, the central office of which is in Chicago, represents the highest level. The best professionals from all over the world trade here and if you set the maximum goals – welcome to the CME.

Read in this article:

  • a brief history of formation of the exchange giant – CME Group;
  • advantages of trading on the Chicago exchange;
  • exchange trading hours;
  • what futures could be traded;
  • where to take CME quotes;
  • how to see trading volumes;
  • trading strategies;
  • how to trade from another country;
  • how to see the RUB exchange rate and oil price on the Chicago exchange.

Useful links in addition to the main article:

  • How a beginner can start trading on CME. The capital size;
  • How much you can make on the Chicago exchange;
  • The most liquid futures on CME for intraday trading;
  • Account opening on CME: pitfalls;
  • Traders’ mistakes on CME.

How the giant of exchange trading – CME Group – was established

The first futures exchange in the world – Chicago Board Of Trade (CBOT) – opened its doors in 1848. At the very beginning, CBOT traded many agricultural products. Producers (farmers) and consumers could use the exchange for price fixation or hedging. For many years CBOT traded agricultural products only, including grain, corn, soybean, wheat and cattle. The first silver contract was executed on CBOT in 1969.

Contracts on bonds of the government national mortgage association were introduced in circulation on CBOT in 1975. The open outcry trading method (when traders shouted out their orders staying on the trading floor) was started to be replaced with electronic trading systems in 1994.

Chicago Mercantile Exchange (CME or Chicago Merc was founded in 1874) originally was named The Chicago Butter and Egg Board. This name reflected its specification, however, in the course of time the exchange expanded the spectrum of its trading instruments, was named the Chicago Mercantile Exchange and started to introduce new technologies. Thus, seven currency contracts were introduced into circulation in 1972. It started to trade the futures on the most popular stock index (S&P) in the world.

CME introduced GLOBEX in 1992. It was an electronic system, which allowed trading 5 days a week with 1 hour break. The new technology provided buyers and sellers with a possibility to execute trades through the computer without using a broker in the trading hall. CME is the first US exchange, which became a public company. Its stock started to be traded on the New York Stock Exchange in 2002. That is why, if you want to learn the Chicago exchange stock value, look at the current NYSE:CME quotes. By the way, the CME Group pays stable dividends on its stock.

CBOT and CME had been separate organisations until 2006. They united in 2007 under the CME Group name. The newly founded group continued the aggressive program of expansion to other futures exchanges.

In 2008, the CME Group acquired the New York Mercantile Exchange (NYMEX was founded in 1882), which owned the New York Commodity Exchange (COMEX) – a major energy and precious metal futures exchange.

The picture above (taken from the CME Group presentation) says that “Combination is greater than the sum of its parts”.

The CME Group acquired the Kansas City Board of Trade in 2012. The CME Group Europe was opened in London in 2014, but it didn’t exist long, since, according to the group officials, European traders preferred to trade through connecting to the American infrastructure.

What instruments are traded on the CME Group platforms

The market structure is organised on the Chicago exchange in such a way so that each platform specialises in a separate group of futures.

CME (Chicago) trades:

  • Stock index futures: S&P-500, Nasdaq, Dow Jones and Russel-2000.
  • Currency futures. For example, 6E is the EUR/USD futures and 6B is the GBP/USD futures. The 6R ticker stands for RUB/USD futures. You can use it to learn the RUB/USD exchange rate on the Chicago exchange.
  • Livestock product futures (pork meat, milk and beef cattle).
  • Bitcoin futures. Do you want to learn the current bitcoin exchange rate on the Chicago exchange? Enter the BTC ticker in the instrument manager and you will get a chart with the most recent quotes.
  • Other futures (for example, sawn wood products).

CBOT (Chicago) trades:

  • Treasury Note futures (treasuries).
  • Agricultural product futures (corn, soybean products, rice and oats). For example, if you want to learn the wheat price on the Chicago exchange, enter the ZW ticker in the instrument manager window. A chart will open, in which you see the current quote.

NYMEX (located in New York but is a part of the CME Group since 2008) trades:

  • WTI oil futures. Do you want to see the current oil chart on the Chicago exchange? Enter the CL (similar to Crude oiL) ticker into the instrument manager window. The platform will build the current oil futures chart based on the data from the CME Group.
  • Natural gas futures.
  • Other energy resource futures.
    COMEX (became a part of NYMEX in 1994) trades:
  • gold futures;
  • silver futures;
  • other metal futures (copper, platinum and palladium).

Options (what options are) specialisation is organised similarly.

The Chicago exchange trading hours

When does CME open?

The most proper way to learn the Chicago exchange trading hours is to visit the official web-site. Namely, visit the respective Trading Hours section at www.cmegroup.com/trading-hours.html (see the screenshot below):

Here you can find a schedule for each futures and option. The time format is Central Time.

Trading on the CME Group platforms is carried out with the help of the Globex system:

  • 5 days a week (on weekdays);
  • with breaks for clearing.

That is why, if it is a weekday, you may execute trades on CME through Globex with a high level of probability. However, there is a nuance – volatility, which changes very sharply during the day.

A sharp splash of trading volumes and price fluctuation amplitude take place when a weekday starts in the US financial organisations.

Example: 10-minute EUR futures chart for the beginning of September 2020.

The quote chart is built in the trading and analytical ATAS platform:

  1. There is the instrument and exchange ticker in the top left corner. The time scale and trading volume histogram are in the bottom. The time format is UTC (Universal Time Coordinated).
  2. Volumes are not big during the Asian session.
  3. Activity level increases when a trading day starts in Europe.
  4. The highest activity level is when traders of the American continent start to trade.
  5. Trading stops on CME between the American and Asian sessions. This pause is required for clearing – the settlement process based on the results of executed trades.
  6. We have an interesting moment here. The exchange closed at 17:00 UTC due to the Labor Day celebration in the United States.

What else should be taken into account.

  • The trading time and activity character during the day may differ for different instruments.
  • A higher collateral is required for rolling a position overnight.

All this should be taken into account when planning trading on the Chicago exchange.

Advantages of trading on CME

Apart from such an obvious advantage as a wide choice of liquid and volatile instruments, trading on CME has the following pros:

Economy. The merger of various commodity exchanges under the CME aegis resulted in a huge economy of scale. The extensive CME clearing platform and global GLOBEX (the electronic CME platform, which trades practically round the clock) coverage allowed to create an exchange megastructure, which distributes expenses over a countless number of products.

Affordable entry threshold. It goes without saying that trading on the Moscow Exchange brings less expenses to a trader than trading on CME. Nevertheless, practically any person with an average income level may start trading the minimum volume of contracts. Especially if we speak about mini and micro contracts, the aim of which is namely in removing barriers for weakly capitalized participants to start trading.

Regulation. The CME Group structure includes the Market Regulation Department. It carries out internal surveillance over trading, accounts and markets for detection and elimination of potential violation of the rules, established by the state acts. The Commodity Futures Trading Commission (CFTC), the US Securities and Exchange Commission (SEC) and other authoritative structures ensure the rules observance.

You can file a claim against violation of the rules or confess in your own violation of the rules on the official web-page: https://www.cmegroup.com/market-regulation.html.

Footprint. You will have to pay for the flow of the market information (datafeed) from the Chicago exchange, which is a disadvantage. However, if you have a powerful application for analysing the exchange activity (such as the ATAS platform), you can get an advantage by means of professional indicators. If you use ATAS functions and connect the CME data to it, you will get high quality functionality for building footprints (the most advanced chart type) and working with them in real time.

The Chicago exchange also stores data about the volume of sold contracts and open interest. Open interest is a total number of opened but not closed long and short positions. You can read this article to learn how to use the open interest on CME.

How to connect the CME quotes online

Follow this plan:

  1. Go to ATAS.net web-site and register yourself.
  2. Go to the Personal Area and get the link for downloading the ATAS platform and also login and password.
  3. Download the platform, install and launch it.

In principle, this is sufficient for receiving the CME quotes, because when you open charts they load the CME quotes through one of the ATAS servers.

Example: let’s see what the price of the bitcoin futures on CME is (the chart below).

To do it:

  1. Press the Chart button in the main window. The button opens the instrument manager, in which you select US Futures / FX / Bitcoin and press OK.
  2. A chart will open.
  3. Note that there is a bitcoin futures ticker and CME ticker in the top left corner.
  4. The chart shows current quotes without time delay. However, the data will not be refreshed. If you want to refresh the chart, mouseover it, click the right mouse button and select Refresh in the context menu. The data will be refreshed.

In order not to click Refresh every time, connect to the CME quotes through the exchange data providers. How to do it? You will find a detailed description of how to do it in our Knowledge Base in the Connecting accounts and quotes section. Note that you should pay for this service. The only exception are demo quotes with some restrictions.

Where to find CME volumes

In case you are a beginner trader and you started to study financial markets from trading on Forex, then, most probably, it would be interesting for you to learn how to analyse volumes in the currency markets. CME may help you in it.

The currency futures trading volume is very big on CME (on the average, from USD 50 billion to USD 100 billion a day). These are real contracts and not tick volumes, which are streamed by MetaTrader (comparison of MetaTrader and ATAS platforms).

Example: the RUB futures chart on the Chicago exchange.

RUB exchange rate chart on CME online

Number 1 in this day period chart marks the trading volume histogram for one day. The higher the column, the higher the trading activity is. Note also the candles – they are unusual. You can see what takes place ‘inside’. This is possible thanks to ATAS. In order to build the same chart:

  • add the Volume on Chart indicator;
  • transfer the chart to the cluster mode;
  • select the Volume Digital Histogram cluster type (and you will be able to see the volume at every level inside the candle);
  • specify framing in the form of candles in the cluster settings. This method of information display provides a special advantage, since you can ‘read the chart’ with a high degree of detail.

Number 2 shows that a high volume cluster was formed on the peak of August 20 (more than 700 contracts). Based upon the price reaction, most probably, a major seller entered the market, since the candle closed in the middle.

Next day we received confirmation. Number 3 points to even a bigger cluster consisting of 1,178 contracts. In case these were powerful buys, why didn’t the price rocket up? Respectively, traders that managed to ‘read’ the situation should have expected a decrease. Which happened (‘unexpectedly’ for the majority) during the next trading session.

We should note that such charts with a breaking to the volume by levels could be applied not only for the RUB/USD futures, but also for other currency instruments. However, CME trades only the USD based instruments:

  • 6A – AUD/USD futures;
  • 6B – GBP/USD futures;
  • 6C – CAD/USD futures;
  • 6E -EUR/USD futures;
  • 6J – JPY/USD futures;
  • 6L – BRL/USD futures;
  • 6M – MXN/USD futures;
  • 6R – RUB/USD futures;
  • 6S – CHF/USD futures;
  • 6Z – ZAR/USD futures.

There are no cross rate currency pairs on CME.

Yet another example: the oil futures chart – the data come from the NYMEX, which is a part of the CME Group. Select US Futures / Energy Products / Light Sweet Crude in the instrument manager to open the chart.

Oil futures on CME

The 1-hour period chart shows the following numbers:

  1. The market profile with the breaking down by Delta.
  2. Trading volume.
  3. Delta (the difference between the market buys and sells).
  4. The bright green cluster. It shows that buyers entered the market at the level of 37.15 and probably that was the reason why the price increased by 10 cents.

As you can see, volume analysis allows acting reasonably and building more rational trading strategies, which we will discuss now.

Trading strategies on CME

CME doesn’t provide any restrictions to the applied trading strategies (of course, if these strategies have no signs of fraud, for example, spoofing). We recommend you to apply only that system, which gives you advantage over the other multiple market participants.

In case you do not have it, we recommend you a list of useful links.

You should also watch webinars, which were conducted by professional traders, on our YouTube channel. They have traded on CME with profit for many years, using the ATAS platform.

  • Cluster analysis patterns. The Cactus in the Desert trading strategy;
  • Building levels;
  • How to use the Cumulative Delta indicator on CME.

The subject of highly profitable scalping on CME deserves a separate list. The matter is that ATAS has the built-in Smart Tape and Smart DOM modules. These instruments will be useful for executing short-term trades (scalping) on the Chicago exchange.

How to trade on CME from another country

Due to the Globex system, introduced on CME in 1992, trading in the major financial markets of the world is accessible nearly from any place in the world. If you want to start trading on CME, it is mandatory to open an account through your broker – an intermediary company, which provides you with access to trades.

You can trade both through your national broker and through an American one. We are not going to recommend you a specific company (you should select it by yourself), but we will help you with a sound advice, described in the following articles:

Be prepared that when you open an account for trading on the Chicago exchange, you will need to fill in and file a multitude of documents. A good brokerage company manager should help you to deal with formalities.

Conclusions

The CME Group, which is often called the Chicago exchange, is a combination of several major exchange platforms. It carries out the most large-scale futures and options trading in the world, the volume of which is about USD 1 trillion a day.

The Globex system and online access allow you to buy and sell financial instruments on CME. The most important thing is to act prudently. Do not hurry to put significant amounts at risk before you make sure that your trading strategy brings you a stable profit. The trading and analytical ATAS platform will help you to gain the advantage for trading on CME.

Information in this article cannot be perceived as a call for investing or buying/selling of any asset on the exchange. All situations, discussed in the article, are provided with the purpose of getting acquainted with the functionality and advantages of the ATAS platform.

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