The International Monetary Market (IMM) was introduced in December 1971 and formally implemented in May 1972, although its roots can be traced to the end of Bretton Woods through the 1971 Smithsonian Agreement and Nixon's suspension of the U.S. dol🎀lar's convertibility to gold.

The IMM Exchange was formed as a separate division of the 澳洲幸运5开奖号码历史查询:Chicago Mercantile Exchange and as of 2009, was the second-largest 澳洲幸运5开奖号码历史查询:futures exchange in the world. The primary purpose of the 澳洲幸运5开奖号码历史查询:International Monetary Market is to trade 澳洲幸运5开奖号码历史查询:currency futures, a relatively new product previouslyܫ studied by academics as a way to open a freely traded exchange market to facilitat🎀e trade among nations.

The first futures experimental contracts included trades against the U.S. dollar, such as the British pound, Swiss franc, German 澳洲幸运5开奖号码历史查询:Deutschmark, Canadian dollar, Japanese yen, and in September 1974, the 澳洲幸运5开奖号码历史查询:French franc. This list would later expand to include the Australian dollar, the euro, and 澳洲幸运5开奖号码历史查询:emerging market currencies such as the Russian ruble, Brazilian real, Turkish lira, Hungarian forint, Polish zloty, Mexican peso, and South African rand. In 1992, the German Deutschmark/Japanese yen pair was introduced as the first futures 澳洲幸运5开奖号码历史查询:cross rate currency. But🧸 these early successes didn't coౠme without a price.

The Drawbacks of Currency Futures

The challenging aspects were how to connect values of IMM foreign exchange contracts to the 澳洲幸运5开奖号码历史查询:interbank market—the dominant means of currency trading in the 1970s—and how to allow the IMM to be the free-floating exchange envisioned by academics. Clearing 澳洲幸运5开奖号码历史查询:member firms were incorporated to act as 澳洲幸运5开奖号码历史查询:arbitrageurs between banks and the IMM to facilitate 澳洲幸运5开奖号码历史查询:orderly markets between bid and ask spre🎃ads. The Continental Bank of Chicago was later hired as a 💛delivery agent for contracts. These successes bred an unforeseen level of competition for new futures products.

The 澳洲幸运5开奖号码历史查询:Cboe Options Exchange competed and received the right to trade U.S. 30-year 澳洲幸运5开奖号码历史查询:bond futures while the IMM secured the right to trade 澳洲幸运5开奖号码历史查询:eurodollar contracts, a 90-day interest rate contract settled in cash rather than 澳洲幸运5开奖号码历史查询:physical delivery. Eurodollars came to be known as the "eurocurrency market," which is used mainly by the Organization of the Petroleum Expor🀅ting Countries (OPEC), which always required payment for oil in U.S. dollars. This 澳洲幸运5开奖号码历史查询:cash settlement aspect would later pave the way for 澳洲幸运5开奖号码历史查询:index futures such ♉as world stock market indexes and the IMM Index. Cash settlement would also allow the IMM to later become known as a "cash market" because of i💮ts trade in short-term, interest-rate-sensitive instruments.

A System for Transactions

With new competition, a transaction system was desperately needed. The CME and Reuters Holdings created the Post Market Trade (PMT) to allow a global electronic automated transaction system to act as a single clearing entity and link the world's financial centers like Tokyo and London. Today, PMT is known as Globex, which facilitates not only clearing but 澳洲幸运5开奖号码历史查询:electronic trading for traders around the world. In 1975, U.S. T-bills were born and began trading on the IMM in January 1976. T-bill futures began trading in April 1986 with approval from the 澳洲幸运5开奖号⛦码历史查询:Commo༒dities Futures Trading Commission (CFTC).

The Rise of the Forex Market

The real success would come in the mid-1980s when options began trading on currency futures. By 2003, foreign exchange trading had hit a 澳洲幸运5开奖号码历史查询:notional value of $347.5 billion.

The 1990s were a period of explosive growth for the IMM due to three world event𒐪s:

1. Basel I in July 1988
   The 12 nation 澳洲幸运5开奖号码历史查询:European Central Bank governors agreed to standardize guidelines for banks. 澳洲幸运5开奖号码历史查询:Bank capital had to be equal to 4% of assets.
   
2. Single European Act
   This not only allowed capital to flow freely throughout national borders but also allowed all banks to incorporate in any EU nation.
   
3. 澳洲幸运5开奖号码历史查询:Basel II
   This is geared to control risk by preventing losses, the realization of which is still a 澳洲幸运5开奖号码历史查询:work in progress.

A bank's role is to channel funds from depositors to borrowers. With these new acts, depositors could be governments, governmental agencies, and multinational corporations. The role of banks in this new international arena exploded to meet the demands of financing 澳洲幸运5开奖号码历史查询:capital requirements, new loan structures, and new interest rate structures such as overnigh𝓀t lending rates, Increasingly, IMM was 🐻used for all finance needs.

Plus, a whole host of new trading instruments was introduced, such as money market swaps to lock in or reduce borrowing costs, and swaps for 澳洲幸运5开奖号码历史查询:arbitrage against futures or hedge risk. 澳洲幸运5开奖号码历史查询:Currency swaps would not be introduced until the 2000s.

Financial Crises and Liquidity

In 澳洲幸运5开奖号码历史查询:financial crisis situations, central bankers must provide 澳洲幸运5开奖号码历史查询:liquidity to stabilize markets because risk may trade at premiums to a bank's 澳洲幸运5开奖号码历史查询:target rates, called money rates, that central bankers can't control. Central bankers then provide liquidity to banks that trade and control rates. These are called 澳洲幸运5开奖号码历史查询:repo rates, and they are traded through the IMM. Repo markets allow participants to undertake rapid refinan♐cing in⛎ the interbank market independent of credit limits to stabilize the system. A borrower pledges securitized assets such as stocks in exchange for cash to allow its operations to continue.

Asian Money Markets and the IMM

Asian 澳洲幸运5开奖号码历史查询:money markets linked up with the IMM because Asian governments, banks, and businesses needed to facilitate business and trade in a faster way rather than borrowing U.S. dollar deposits from European banks. Asian banks, like European banks, were saddled with dollar-denomin▨ated deposits because all trades were dollar-denominated as a result of the U.S. dollar's dominance.

So, extra trades were needed to facilitate trade in other currencies, particularly euros. Asia and the EU would go on to share not only an explosion of trade but also two of the most widely traded world currencies on the IMM. For this reason, the Japanese yen is quoted in U.S. dollars, while eurodollar futures are quoted based on the IMM Index, a function of the three-month LIBOR.

The IMM Index base of 100 is subtracted from the three-month LIBOR to ensure that 澳洲幸运5开奖号码历史查询:bid prices are below the 澳洲幸运5开奖号码历史查询:ask price. These are normal procedures used in other widely traded inst𒆙ruments on the IMM to ensure market stabilization.

The Bottom Line

As of June 2000, the IMM switched from a nonprofit to a profit, membership and shareholder-owned entity. It opens for trading at 8:20 a.m. Eastern Time to reflect major U.S. economic releases reported at 8:30 a.m. Banks, central bankers, 澳洲幸运5开奖号码历史查询:multinational corporations, traders, 澳洲幸运5开奖号码历史查询:speculators, and other institutions all use its various products to borrow, lend, trade, profit, finance, speculate, and hedge risks.