Commodity Trading - Commodity Exchanges

Every day, commodities are traded on the more than one dozen major commodity exchanges that are situated worldwide.

Chicago houses two exchanges, the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME). Between these two exchanges, a wide array of commodities are traded, bought and sold.

The CBOT has a very diverse collection of commodity types. These include agriculture such as corn, soybeans, wheat and oats but the diversity extends to include metal contracts such as 100 oz gold, 5,000 oz silver and mini contracts for both of these. Mini contracts allow for a lower initial investment as well as smaller ticks (price increments). This is because the amount that is included in the original contract is smaller than the traditional amount.

The CBOT also has several non physical commodities futures contracts. There are government bonds, including 30 year bonds, 10 year notes, 5 year swaps and others. A swap, whose primary use is for hedging, is a blend of a forward and a cash trade. They are similar to futures. Other trades on the CBOT include major indexes as the Dow AIG Index (a commodity index) and the Big Dow (a stocks index).

The CME, also in Chicago, has been trading commodities for more than one hundred years. Trades such as live as well as feeder cattle, hogs, pork bellies and others have been executed on this exchange. However, lumber, milk, butter and fertilizer are also traded there. However, the CME can also shift gears to offer an E-mini S&P 500 contracts for trading on the Standard & Poor's 500 stock index. For those who prefer the ever popular NASDAQ, there is E-mini NASDAQ 100 for trading futures contracts.

Some of the more unusual trades made on the CME include Eurodollar futures and the Weather derivative which is a futures contract that predicts weather conditions during different seasons for areas around the world.

The New York Mercantile Exchange (NYMEX) is one of the oldest in the United States. Among the wide variety of petroleum and metal commodities and futures that are traded are Brent and mini crude (CL, WS), Natural Gas (NG), Gasoline (HU), Heating Oil (HO, BH) and many others. Other offerings are Gold (GC), Silver (SI), Copper (HG) and Aluminum (AL). You may have noticed that the commodity abbreviation does not match the common chemical element abbreviation. This is because futures contracts are listed second and have their own abbreviations.

New York houses yet another major exchange, the New York Board of Trade (NYBOT). The NYBOT is New York's original futures exchange. Offerings on this exchange include cocoa, coffee, sugar, FCOJ (frozen concentrate of orange juice), cotton and many other products that are of an agricultural nature. Non physical items are also offered for trade such as currency pairs, the United States Dollar Index and the NYSE Composite. A unique and convenient feature of the NYBOT is that it also offers live price info that can even be accessed by a Blackberry or other PA.

However, the commodity and futures exchanges are not confined to the United States. In fact, one of the most active exchanges in the world is found in London. Liffe, once known as the London Fox (London Futures and Options Exchange), has merged with euronext. Trades such as cocoa, sugar, coffee, wheat, barley, potatoes and a variety of other agricultural products are conducted on Liffe.

The London Metal Exchange is not far from Liffe. This historic exchange is one of the grandfathers of precious metals trading. Naturally, trades such as copper, lead and aluminum are made here, but plastics are traded here as well.

A major exchange also resides in Japan. The Central Japan Commodity Exchange (C-COM) is based in Nagoya, Japan. It was formed in 1996 when three major exchanges merged, allowing such diverse commodities as eggs, gasoline, kerosene and ferrous scrap.