What is the International Monetary Market?
The International Monetary Market, or IMM, is a specialized division of the Chicago Mercantile Exchange (CME) that focuses on the trading of currency and interest rate futures, along with corresponding options. Official trading on the IMM began in May 1972 when it was merged into the CME.
A Deep Dive into the International Monetary Market
The IMM trades a variety of currencies such as the U.S. dollar, British pound, euro, and Canadian dollar. It also offers futures contracts for benchmarks like the London Interbank Offer Rate (LIBOR), the 10-year Japanese bond, and the U.S. Consumer Price Index (CPI).
The Evolution of the International Monetary Market (IMM)
Founded in 1898, the Chicago Mercantile Exchange initially launched as the Chicago Butter and Egg Board before changing its name in 1919. The CME made history in 2002 by becoming the first financial exchange to demutualize and go public. Starting in 1961, CME initiated futures trading with contracts for frozen pork bellies, expanding to financial futures and currency contracts by 1969.
Interest rate, bond, and futures contracts made their debut in 1972. Fast forward to recent years—from handling an average daily volume of 19.2 million contracts in 2019 to merging with the Chicago Board of Trade in 2007, and acquiring both NYMEX Holdings, Inc., and parts of Dow Jones—the CME Group has grown into one of the largest financial exchanges globally. In 2017, the innovation continued with the commencement of Bitcoin futures trading.
Beyond the trading floor, CME Group also operates as a key central counter-party clearing provider through CME Clearing.
Challenges in the International Monetary Market
Despite its significant role and rewards, trading in financial futures carries inherent risks, such as:
- Economic, political, and geopolitical uncertainties
- Legislative and regulatory changes
- Swift shifts in financial market conditions
- Fluctuations in price levels, contract volumes, and market volatility
- Changes in global or regional commodity demand and supply
Related Terms: currency futures, interest rate futures, CME Group, LIBOR, Bitcoin futures.
References
- CME Group. “Timeline of CME Achievements”.
- United States Securities and Exchange Commision. “CME Group, Inc.”, Page 7.
- CME Group. “CME Group and Dow Jones & Company Launch Joint Venture of Dow Jones Indexes Business”.
Get ready to put your knowledge to the test with this intriguing quiz!
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## What is the primary function of the International Monetary Market (IMM)?
- [ ] Trading stock options
- [x] Trading currency and financial futures
- [ ] Trading commodities
- [ ] Trading government bonds
## When was the International Monetary Market (IMM) founded?
- [ ] 1875
- [ ] 1914
- [x] 1972
- [ ] 1995
## Which of the following entities originally established the International Monetary Market (IMM)?
- [ ] New York Stock Exchange (NYSE)
- [x] Chicago Mercantile Exchange (CME)
- [ ] National Association of Securities Dealers (NASD)
- [ ] Intercontinental Exchange (ICE)
## Which of the following types of contracts are NOT mainly traded on the International Monetary Market (IMM)?
- [ ] Currency futures
- [ ] Interest rate futures
- [x] Corporate bonds
- [ ] Stock index futures
## What regulatory body oversees the IMM in the United States?
- [ ] Financial Industry Regulatory Authority (FINRA)
- [ ] Securities and Exchange Commission (SEC)
- [x] Commodity Futures Trading Commission (CFTC)
- [ ] Federal Reserve
## What significant event in the financial markets did the establishment of the IMM facilitate?
- [ ] The development of mutual funds
- [ ] The decline of Fixed exchange rates
- [x] The creation of modern financial futures trading
- [ ] The implementation of computerized trading systems
## Which aspect best characterizes the trading activity on the IMM?
- [ ] Primarily overnight trading
- [ ] Exclusive to individual investors
- [x] High leverage and margin trading
- [ ] Focus on long-term investment strategies
## What is one of the major benefits of trading on the International Monetary Market (IMM)?
- [ ] Guaranteed trading profits
- [x] Financial hedging and risk management
- [ ] No transaction fees
- [ ] High tax deductions on profits
## On which larger exchange is the International Monetary Market (IMM) a division?
- [ ] New York Stock Exchange (NYSE)
- [ ] NASDAQ
- [x] Chicago Mercantile Exchange (CME)
- [ ] Intercontinental Exchange (ICE)
## How do changes in the International Monetary Market (IMM) influence global financial markets?
- [ ] By setting commodity prices
- [x] By influencing currency and interest rate movements
- [ ] By determining stock market trends
- [ ] By dictating government policy decisions
