The CME open-outcry and the CME Globex currency markets are essentially the same contracts; however, the key difference between the two is execution. Trades in the open-outcry currency futures contracts are executed on the trading floor of the CME (Chicago Mercantile Exchange Inc.) by individuals working in the pits, while trades in the Globex currencies are executed on the CME's electronic platform.
Many people get confused about the two contracts because they trade side-by-side. This means that both contracts, at one point during the trading day, trade simultaneously. I can explain this a bit better if we take a look at the trading hours for the two venues.
Open-outcry currency trading hours:
Mon-Fri: 7:20 a.m.-2:00 p.m. CST
Globex currency trading hours
Sun-Fri and Holidays: 5:00 p.m.-4:00 p.m. CST the following trading
day
Based on the hours above, we can see that the open-outcry and the Globex contracts trade side-by-side during the daytime session hours of 7:20 a.m.-2:00 p.m. The Globex currencies continue to trade after the open-outcry session closes, and trade for 23 hours a day.
One of the most important facts about the two markets that many traders fail to realize is that these markets are fungible. This means that if you enter into a position on one platform, you can offset the contract in the other. For example, you decide to enter a position in the Japanese yen in the open-outcry one afternoon. You are allowed to exit the position on Globex, and these two contracts will offset each other. The reverse is also true.
There are several major advantages of trading on a pure electronic market, including:
- Automatic fills
- All bid/offers are visible
- The size of the bid/offers is visible
I personally recommend that all of my clients trade on the Globex platform, which is truly a transparent market.
Ben Kim is a Senior Market Strategist with Lind Plus. For more information on this topic or others, he can be reached at 800-355-5757 or via email at bkim@lind-waldock.com
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