What Is Contract Market?

Contract market, or designated contract market, is a registered exchange where commodities and options contracts🌟 are traded. It is sometimes known as a "designated exchange."

Understanding Contract Markets

A contract market, or designated contract market (DCM) is any board of trade (exchange) designated to trade a specific options or futures contracts. It must register with the overseeing regulatory authority, most notably the 澳洲幸运5官方开奖结果体彩网:Commodity Futures Trading𓄧 Commission (CFTC), pursuant to Section 5 of the 澳洲幸运5官方开奖结果体彩网:Commodity Exchange Act (CEA). Most large futures ma🌃rkets also provide clearing and settl𒅌ement functions.

A contract market, otherwise known as an exchange, provides the environment, whether it be a physical market floor or virtual electronic platforms, where futures and options contracts are bought and sold. It is a marketplace in which securities, 澳洲幸运5官方开奖结果体彩网:commodities, 澳洲幸运5官方开奖结果体彩网:derivatives, and other financial instruments are traded. The core function of an exchange is to ensure fair and orderly trading, financial controls, an꧂d t🍰he efficient dissemination of trade price information.

To maintain 澳洲幸运5官方开奖结果体彩网:liquidity, contracts trading on a contract market have standardized sizes, expiration dates, and, for options, 澳洲幸运5官方开奖结果体彩网:strike prices. This standardization can be contrasted with the 澳洲幸运5官方开奖结果体彩网:over-the-counter (OTC) market where buꦑyers and sellers customize and agree to the terms.

History of Contract Markets in the U.S.

The largest futures exchange in the U.S., the 澳洲幸运5官方开奖结果体彩网:Chicago Mercantile Exchange (CME), was formed in the late 1890s, when the only futures contracts offered were for agricultural products. The emergence of interest rates, or bond futures, and currency futures in major 澳洲幸运5官方开奖结果体彩网:foreign exchange markets came in the 1970s. Today's futures exchanges are significantly larger, with hedging of fin👍ancial instruments via futures. These futꦍures hedging contracts comprise the majority of the futures market activity. Futures exchanges play an important role in the operation of the global financial system.

Financial exchanges have seen many mergers, with the most significant being between the CME and the 澳洲幸运5官方开奖结果体彩网:Chicago Board of Trade (CBOT) in 2007. Rebranded as the CME Group, it then acquired NYMEX Holdings Inc., the parent of the 澳洲幸运5官方开奖结果体彩网:New York🐎ꦜ Mercantile Exchange (NYMEX) and 澳洲幸运5官方开奖结果体彩网:Commodity Exchange Inc. (COMEX) in 2008. Growing again in 2012, it added the Kansas✃ City Board of Trade, which is a dominant p🦋layer in hard red winter wheat.

Another major player in the U.S. is the 澳洲幸运5官方开奖结果体彩网:Intercontinental Exchange (ICE). Born as an electronic exchange in 2000, ICE acquired the 🧸澳洲幸运5官方开奖结果体彩网:International P🧸etroleum Exchange (ICE) in 2001. In 2007, it obtained both the 澳洲幸运5官方开奖结果体彩网:New York Board of Trade (NYBOT) and the Winnipeg Commodity Exchange (WCE). Finally, it expanded into equit𒈔ies with the acquisiti𒊎on of NYSE Euronext in 2013.

As a result of Dodd-Frank Wall Street Reform and Consu🤡mer Prꦇotection Act (Dodd-Frank), legislation enacted in 2010, DCMs are one of two types of exchanges on which mandatory cleared swaps may trade. The other type of exchange is called a 澳洲幸运5官方开奖结果体彩网:swap execution facility (SEF). The legislation atte🍒mpted to move what were contracts between two parties onto the two types of exchanges so that they were available to many counterparties.