What is the New York Board of Trade (NYBOT)

The New York Board of Trade (NYBOT) was a commodity futures exchange which traded futures contracts and options on futures for physical commodities such as sugar, cotton, coffee, cocoa and orange juice. The exchange also traded financial and index contracts based on stock market indices, currencies, and interest rates.

BREAKING DOWN New York Board of Trade (NYBOT)

​​​​​​​The New York Board Of Trade (NYBOT) exchange was originally founded as the New York Cotton Exchange in 1870. In 1997, they acquired the Coffee, Sugar and Cocoa Exchange (CSCE). The CSCE also dates back to the 19th century, founded in 1882 as the Coffee Exchange of New York.

In 2004, the two exchanges merged under a new name, The New York Board of Trade. Just three years later, the NYBOT was acquired by the Intercontinental Exchange (ICE).

Early Exchanges Enable Trading in Futures 

The roots of the NTBOT and N.Y. Cotton Exchange illustrate how futures contracts have evolved to become the sophisticated hedging tools used by financial professionals today. The emergence of exchanges allows for easier trading of contracts in basic commodities.

When the New York Board Of Trade was still The Cotton Exchange, it facilitated trading in cotton futures. Cotton is extensively used to manufacture clothing, linens, and other related products before the use of synthetic fibers. Because cotton is an agricultural commodity, its price could be subject to volatile changes. These changing prices made it difficult for manufacturers to price their goods. As far back as the early 19th century, futures markets began to operate and exchanges were formed to standardize contract terms.

Standardized cotton futures allowed manufacturers to buy at a predetermined price for future delivery, months or years later. So, regardless of how the spot price of cotton might fluctuate, manufacturers could be more certain of the cost of their raw materials. Futures also helped the producers of cotton by guaranteeing a price for cotton the farm would deliver in the future. A standard cotton futures deal would specify the amount of cotton to be delivered and its quality.

Similarly, the Coffee, Sugar and Cocoa Exchange (CSCE) traded agricultural futures contracts. The exchange had its roots in the Coffee Exchange, which was established in 1882. The Coffee Exchange added trading in sugar in 1914 and merged with the Cocoa Exchange in 1979.

Other exchanges, located mostly in New York and Chicago, traded in futures for grains, hides, butter, eggs, livestock, and metals.

NYBOT Morphs Into a Global Electronic Exchange

For more than a century, contracts would trade on exchange floors in the pits with open outcry. However, as communications and computer technology improved, more trades were executed over electronic communication networks (ECNs).

A few years after the Intercontinental Exchange acquired the NYBOT, exchange floors were closed so that all trades would be executed electronically. ICE operates completely as an electronic exchange and is linked directly to individuals and companies looking to trade in oil, natural gas, jet fuel, emissions, electric power, commodity derivatives, and futures.