What Is the International Monetary Market?
Let me tell you directly: the International Money Market, or IMM, is a division of the Chicago Mercantile Exchange (CME) that handles the trading of currency and interest rate futures and options. Trading on the IMM began in May 1972, right after the CME and the IMM merged.
International Monetary Market Explained
As I explain this, know that the IMM division of the CME covers currencies such as the U.S. dollar, the British pound, the euro, and the Canadian dollar. In addition to currencies, the IMM trades the London Interbank Offer Rate (LIBOR), the 10-year Japanese bond, and the U.S. Consumer Price Index (CPI).
History of the International Monetary Market (IMM)
The Chicago Mercantile Exchange was founded in 1898, originally called the 'Chicago Butter and Egg Board,' though it changed its name in 1919. The CME was the first financial exchange to demutualize and go public in 2002. In 1961, the CME launched its first futures market for frozen pork bellies. By 1969, it added financial futures and currency contracts, and the first interest rate, bond, and futures contracts started in 1972.
According to its 2019 annual report, the CME handles an average daily volume of 19.2 million contracts, which is a slight decline from 2018. While some trading still happens in the traditional open outcry method, 80% of it is done electronically through the CME Globex platform.
In 2007, the CME merged with the Chicago Board of Trade to form the CME Group, one of the largest financial exchanges worldwide. The CME acquired NYMEX Holdings, Inc., the parent of the New York Mercantile Exchange (NYMEX) and Commodity Exchange, Inc. (COMEX), all in 2008. In 2010, the CME expanded further by purchasing a 90% interest in the Dow Jones stock and financial indexes. In 2012, it continued growing with the purchase of the Kansas City Board of Trade, the dominant player in hard red winter wheat. In 2017, the CME began trading in Bitcoin futures.
Additionally, CME Group operates CME Clearing, a leading central counterparty clearing provider.
Limitations of the International Monetary Market
While significant rewards are possible when trading financial futures, you need to be aware that the CME outlines specific risks related to this segment of its business.
Specific Risks in IMM Trading
- Economic, political, and geopolitical market conditions
- Legislative and regulatory changes
- Broad or quick changes in the industry and financial markets
- Shifts in price levels, contract volumes, and/or volatility in the derivatives markets, along with underlying markets in equities, foreign exchange, interest rates, and commodities
- Changes in global or regional demand or supply for commodities
Other articles for you
A home mortgage is a secured loan for purchasing residential property, with various types, terms, and processes explained.
Total return measures an investment's complete performance by including all income and gains over a period.
Work-in-progress (WIP) refers to partially completed goods in production, accounting for raw materials, labor, and overhead costs on a company's balance sheet.
Currency serves as a medium of exchange for goods and services, typically issued by governments in physical or digital forms.
A hockey stick chart shows a sharp increase after a period of stability, resembling a hockey stick shape.
Discontinued operations are company segments sold or shut down, reported separately on income statements to distinguish from ongoing activities.
The Fear & Greed Index measures investor emotions in stock and crypto markets to gauge if assets are overvalued or undervalued.
Qtum is a cryptocurrency blending Bitcoin's security and Ethereum's smart contracts for business use.
A standby letter of credit (SLOC) is a bank-issued guarantee that ensures payment or project completion if a party defaults on a contract.
Trust preferred securities (TruPS) were hybrid financial instruments issued by banks that combined debt and equity features but were phased out after the 2008 financial crisis due to regulatory changes.