PBS - OPEN OUTCRY: Chicago Mercantile Exchange Center

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Yesterday and Today
Over a century ago, the Chicago Butter and Egg Board was founded with two contracts on butter and eggs. Since 1919, when it evolved into the Chicago Mercantile Exchange, the Merc has traded futures on over 50 products, from frozen pork bellies and live cattle to Eurodollar and index futures.

CME first invited members to trade futures contracts on agricultural commodities via the open outcry system. This system of trading - which is still used today - is similar to hundreds of auctions going on at the same time. Traders stand in a trading pit and call out prices and quantities that indicate their willingness to buy or sell. They use hand signals to convey the same information. (Otherwise it would be difficult to hear when so many people are shouting at the same time.) 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 futures or options product.

The Merc has become one of the world's leading exchanges for the trading of futures and options on futures and a marketplace for global risk management.

Today, CME has four major product areas: interest rates, stock indexes, foreign exchange and commodities. The dollar value of contracts traded on an average day exceeds $712 billion.

CME currently has the largest futures and options on futures open interest of any exchange in the world. (Open interest is the number of contracts outstanding at the close of the trading day and a leading indicator of liquidity.)

The Future of Open Outcry
The explosion of electronic trading has prompted speculation that the open outcry system is quickly becoming obsolete. New advances in screen-based trading have forced both traders and exchanges to keep up with rapidly evolving technological developments. Now, exchanges like the Merc bring in new technology to enhance the open outcry process and to keep the old system as viable as possible.

In 1992, CME introduced a global electronic trading system (GLOBEX®), that regulated after-hours trading. Its successor, GLOBEX2, was introduced in 1998 for virtually round-the-clock trading. E-mini S&P 500 contracts were introduced in September 1997, a smaller version of the standard S&P 500 contract. The e-mini was the first screen-based contract to trade during regular trading hours on the floor of a United States exchange.

Today, the Merc allows market participants to buy and sell futures in a number of ways. Whether they're sitting at trading booths on CME trading floors, working from offices and homes across the country, or making trades during or after regular trading hours, more and more choices are available to investors. Even on the CME trading floors in downtown Chicago, some traders buy and sell contracts exclusively using computers, some prefer being face-to-face with other traders in the pits, and an increasing number trade both ways.


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