Chicago Board of Trade

The CBOT's principal role is to provide contract markets for its members and customers and to oversee the integrity and cultivation of those markets. Its markets provide prices that result from trading in open auction or electronic platforms. The marketplace assimilates new information throughout the trading day, and through trading it translates this information into benchmark prices agreed upon by buyers and sellers. Key Dates: Grain Futures Act of 1922 establishes first federal control over futures trading. CBOT begins trading in U.S. Treasury bonds, which become the exchange's most active item. New CEO reaffirms plans to restructure CBOT as for-profit company, with electronic trading component. Chicago Board of Trade (CBOT) is one of the busiest commodities exchanges in the world. The Board of Trade has more than 3,600 members, who trade almost 50 different futures and options products, including U.S. Treasury bonds, silver, soy beans, wheat, and Dow Jones Industrial Average futures. Annual trading volume is more than 200 million contracts. The CBOT operates as a not-for-profit corporation run by its members and a Board of Directors. Trades are accomplished through a so-called open outcry system, where traders meet face-to-face to make transactions in trading rooms known as pits. The CBOT adopted a computerized trading system for some trades in the late 1990s. Open outcry trading fell out of use at other leading exchanges in the 1990s, and the future of CBOT's trading pits was increasingly called into question. By the early 2000s, the future direction of the CBOT was still under consideration. The CBOT announced a decision to transform itself into a for-profit corporation with two separate trading areas, one electronic and one open outcry. This restructuring was bogged down by negotiation and litigation between the CBOT and the other Chicago exchanges, the Chicago Board Option Exchange and the Chicago Mercantile Exchange, and by indecision on the part of CBOT members and executives. As of March 2001, the CBOT planned to move ahead with restructuring and to form an alliance with the electronic German/Swiss exchange Eurex. The Chicago Board of Trade first consisted of 25 directors who met in a space above a feed store on Water Street. The directors were not all grain merchants. The founding group also included a grocer, a tanner, a hardware merchant, a banker, a bookseller, and a druggist. The Board standardized bushel sizes and established ways of identifying different grades of grain. Trading was not extremely active in the beginning, and the Board tried to lure business by offering free lunches. But Chicago was on its way to becoming the predominant grain market in the Midwest. Chicago's first railroad link was being laid the year the exchange began. Soon Chicago was a rail hub for ten major railroads, and more than a hundred trains came in and out of the city every day. A new canal linked the city to river traffic leading to the Mississippi. Its logistical convenience helped make the city a center for meat packing. Chicago became a national and even international center for agricultural commodities in the 1850s. In 1855 the French government abandoned its practice of buying grain in New York and came to Chicago instead. By 1856, the CBOT had about 150 members, and it moved to new quarters on the corner of South Water and LaSalle Streets. In 1859 the Illinois legislature granted the CBOT a charter, which allowed it authority to govern itself. The CBOT found itself a very popular institution by the end of the 1850s. It had established a new system of grading grain that helped the market run more smoothly. Under the old system, a farmer's lot of grain had to be inspected at many points in the selling process, to make sure it was of the quality and cleanliness it was supposed to be. If a farmer stored his grain with other farmers' lots, grains of differing qualities might get mixed, affecting the price later. The Board