What Is the International Monetary Market?

The International Money Market or IMM is a division of the Chicago Mercantile Exchange (CME) that deals with the trading of currency and interest rate futures and options. Trading on the IMM started in May 1972 when the CME and the IMM merged.

International Monetary Market Explained

The IMM division of the CME includes such currencies as the U.S. dollar, British pound, the euro, and the Canadian dollar. Along with 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 IMM

The Chicago Mercantile Exchange was founded in 1898. Its original name was the "Chicago Butter and Egg Board" although it changed its name in 1919. The CME was the first financial exchange to "demutualize" and become publicly traded in 2000. In 1961, the CME launched its first futures market for frozen pork bellies. In 1969, it added financial futures and currency contracts. The first interest rate, bond, and futures contracts commenced in 1972.

According to its 2017 annual report, today the CME on average handles an average daily volume of 16.3 million contracts, up 4% from 2016. These are worth approximately $1 quadrillion annually. While some trading continues to take place in the traditional open outcry method, 80% of trading is done electronically through its CME Globex electronic trading platform.

In 2007, the CME merged with the Chicago Board of Trade to create the CME Group, one of the largest financial exchanges in the world. 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 had expanded further, purchasing a 90% interest in the Dow Jones stock and financial indexes. In 2012, it continued on its growth spree CME with the purchase of the Kansas City Board of Trade, which was 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 counter-party clearing provider.

Risks to Trading on the International Monetary Market

While significant rewards are possible when trading financials futures, the CME outlines specific risks related to this segment of its business, including:

  • 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