The Exchange, 'open outcry' and the clearinghouse

Much of the public does not understand that the Exchange does not set the prices of the traded commodities. Actually, the prices are determined in an open and continuous auction on the Exchange floor by the members who are either acting on behalf of customers (you and me), the companies they work for (if a hedger), or themselves (for their own account). The process of the auction has been around for more than 100 years is called open outcry. (It has already been replaced outside of the United States and is losing market share in the U.S. to electronic trading primarily for financial futures.).

Open outcry is not like the typical auction at Sothebys, where a single auctioneer announces the bids. ...

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