Futures Markets - Part 3: Futures Exchanges - a look inside

Futures Trading Short Course

Most exchange trading floors are divided into pits (or rings) where traders stand facing one another. These are more or less shallow octagonal areas with raised steps around the edge. Each pit is designated for trading one or more futures contracts. For instance, at the Chicago Board of Trade (CBOT) there are large pits for trading T-bonds, soybean, and corn futures among many others. The Commodities Exchange Center in New York houses more than one futures exchange. There you will find trading pits for such diverse commodities as coffee, sugar frozen orange juice, cocoa, gold, cotton, and heating oil.

Every futures exchange is set up in about the same way. Like the stock exchanges, the people trading on the floor must be members of the exchange itself. The members support the exchange by dues and assessments. Non-members - average investors, for instance trade through brokerage firms whose officers or partners hold memberships.

The exchange provides the place to trade and support facilities, such as phones and price-reporting and dissemination systems. It does not set prices or buy or sell for itself. However, its employees scrutinize operations and strictly enforce exchange rules and federal commodity trading regulations.

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