GLOBEX

GLOBEX is Chicago Mercantile Exchange’s global electronic trading system. The system offers computerized order entry and trade matching on a wide range of futures and options products, virtually 24 hours a day, to people around the world.

For some contracts, GLOBEX functions as an after-hours trading system, enabling the submission of bids and offers on certain products when the floor is closed.

For a number of other contracts, however, it serves as a completely electronic trading system. These products are unique futures contracts designed to be traded exclusively on GLOBEX, rather than in the pits on the CME floor. They are generally called “E-mini” contracts – the “E” stands for “electronic,” and the “mini” refers to the fact that these contracts are typically smaller than their standard, pit-traded counterparts.

Background

The innovative GLOBEX system first became operational in 1992. Originally, GLOBEX was created to meet demand from traders – both locally and around the world – for “overnight” access to the currency futures markets during the hours the Chicago market was closed. In an increasingly global economy, international businesses needed to manage currency risk unhindered by the limitations of local time zones. Fortunately, this need was also developing concurrently with a technological revolution that would make 24-hour access to the futures markets a goal that was possible to achieve.

Since there was also great demand for electronic and after-hours access to other kinds of futures products, many new contracts were made available for trading on the GLOBEX system throughout the ’90s. Now, GLOBEX offers around-the-clock access to a variety of interest rate and index futures as well as currency futures. The first electronically traded contracts on agricultural commodities (E-mini lean hogs and E-mini live cattle) will soon join this list.

The Online Futures Revolution

The introduction in 1997 of the first “E-mini” contract traded on GLOBEX – the E-mini S&P 500 -signaled the beginning of a revolution. In an environment still dominated by pit trading, the E-mini S&P 500 was the first futures contract created specifically for online trading, and the first electronically traded stock index contract. It opened the door to a new audience of traders, and at one-fifth the size of its regular S&P 500 futures contract, it was also more accessible to individual traders.

This ground-breaking new contract proved to be phenomenally successful – in less than three years the E-mini S&P 500 contract became the third most-traded contract at CME (after the first place Eurodollar contract and second place regular S&P 500 contract).

Based on the success of the E-mini S&P 500, an E-mini Nasdaq 100 contract was introduced in June 1999. That product has also proven to be enormously successful. Other special “e” contracts include the new FORTUNE e-50 Index futures, an E-mini Currency contract, and the first weather-related futures products (the Heating Degree Day and Cooling Degree Day contracts).

Additional Lessons

Contents Courtesy of CME Group.