What is the New York Board of Trade?

New York Board of Trade (NYBOT) is a physical commodity futures exchange created in June 2004, by the merger of two historic exchanges: the New York Cotton Exchange and Coffee Sugar and Cocoa Exchange. The New York Board of Trade was renamed as ICE Futures US in September 2007 when it was acquired by the Intercontinental Exchange.

Back to:INVESTMENTS TRADING & FINANCIAL MARKETS

How Does the New York Board of Trade Work?

The NYBT is located in the New York city and trades options and futures for the commodities like cotton, sugar, coffee, orange juice, and cocoa, as well as interest rates, market indexes, and currencies. The New York Board of Trade was originated in 1870 as the New York Cotton Exchange. The Coffee Sugar and Cocoa Exchange was acquired by them in 1997 and in 2004 the two exchanges merged to form the New York Board of Trade. The trading floor of the NYBOT was regulated by the U.S. Commodity Futures Trading Commission, an independent market watchdog agency of the United States government. The trading on the exchange floor used to be conducted by open cry system for more than a century. After a few years of the acquisition by the Intercontinental Exchange, the floors were closed, and entire trade was shifted to the electronic communication networks. At present, the ICE functions as an electronic exchange and is linked directly to individual traders and companies. On the exchange, the investors trade contracts to buy or sell commodities, currencies and other instruments, at a specified price at a specified time in the future. The investors never really buy any physical commodities, they only trade the contracts in order to control the underlying asset. The traders involved in a deal mostly exchange only cash for the trading. It allows the investors to control a large quantity of the underlying assets with a small amount of money and to wield enormous leverage from it. It helps the market to sort out imbalances as the traders arrive a realistic price of the commodities and other financial instruments by using market forces. The future exchanges were formed to standardize the contract terms and for facilitating the trade of the contracts in the basic commodities. Like the Cotton Exchange allowed the manufacturers to acquire the raw materials at a predetermined price for a future delivery. The agricultural products are susceptible to volatile changes. This volatility of the prices makes it difficult for manufacturers to price their products. The future market safeguards both the agricultural producers and the buyers against this volatility.