Business Breakdowns CME Group: The House Always Wins - [Business Breakdowns, EP.224]
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Jul 23, 2025 
In this discussion, Adam Chandler, co-PM at Claremont Global and a financial exchanges expert, dissects the Chicago Mercantile Exchange's inner workings. He explains how exchanges operate and generate revenue while emphasizing the critical role of clearinghouses in risk management. Chandler highlights CME's evolution from a commodity exchange to a leader in financial derivatives. The conversation also touches on how CME adapts to market demands, examines the impact of passive investing, and discusses its competitive strategies and profitability.
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Role of Exchanges and Clearinghouses
- Exchanges serve two main functions: connecting buyers and sellers, and ensuring transaction completion through clearinghouses.
- This reduces counterparty risk and guarantees trade settlement, acting like a referee and a safety net.
CME's Futures Market Focus
- CME specializes in futures, which are standardized contracts for buying or selling assets at a future date.
- It leads the global derivatives market with highly liquid products across key asset classes.
CME's Commodity Market Origins
- CME's origins trace back to 19th century Chicago as commodity exchanges for farmers and producers.
- They evolved from trading agricultural goods to standardized, centrally cleared futures reducing default risk.
