History of FX at CME
CME is an international marketplace that offers FX futures and options on futures, dealing on both its Chicago-based trading floors and its CME® Globex® electronic trading platform, which operates virtually around-the-clock. The exchange was founded in 1898 and has evolved since that time into the largest futures exchange in the United States. CME has a long history of innovation and continually strives to provide even deeper markets and additional risk management products.
CME pioneered the development of financial futures with the launch of currency futures, the world’s first financial futures contracts, in 1972. This was in response to the breakdown of the Bretton Woods Agreement, which had governed the international currency exchange rate policy since the end of World War II.
The Bretton Woods Agreement specified that the U.S. dollar would be tied to the price of gold, with its value set at 1/35th an ounce of gold. All other nation’s currencies were fixed in relation to the dollar’s gold content. Variations were limited to only plus or minus one percent.
These fixed exchange rate bands remained in place until 1971, when President Richard M. Nixon dropped the U.S. dollar’s convertibility to gold and devalued the dollar to 1/38th an ounce of gold. In December 1971, the world’s finance ministers attempted to restructure the value of the major currencies by allowing them to float within a 2 1/4th percent band. But, this agreement collapsed in March 1973, which opened the door to the free float of the major world currencies.
It was during the FX market turmoil leading up to the initial revision of the U.S. dollar “gold peg” that Leo Melamed, Chairman Emeritus of CME, with the endorsement of Nobel Laureate economist Milton Friedman, championed the idea of futures contracts for foreign exchange. On May 16, 1972, the CME’s International Monetary Market opened for business, listing seven foreign currency futures contracts: CME British pounds, CME Canadian dollars, CME Deutsche marks, CME French francs, CME Japanese yen, CME Mexican pesos and CME Swiss francs.
The introduction of currency futures at CME ushered in the era of financial futures, an innovation that blazed the trail for much of what has since followed in world capital markets. Today, CME remains committed to providing the most transparent and cost-efficient markets for individual and institutional players alike.
In April 2001, CME expanded FX market coverage by offering electronic access to its full range of currency contracts virtually 24-hours a day via the CME Globex electronic trading platform. This electronic trading access occurs “side-by-side” with floor trading in CME's currency pits during floor trading hours.
CME’s currency futures contracts continue to play a significant role in today’s global economy. Large and small companies alike are constantly working with foreign currencies. The continuous fluctuation of currency rates can make it difficult for businesses to anticipate costs and forecast profits. More than ever before, there is a need for currency futures, so that businesses can protect themselves from or hedge exchange-rate risks in multinational transactions of all types.
Currency futures volume continues to grow, and CME remains the premier exchange venue for FX market participants.
Why We Made This Site - A message from Andy Daniels, CEO and Founder of Daniels Trading.
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