Over Time, Modern Futures Trading Grew Out Of These Rules

Category: Finance, Currency Trading.

The first recorded instance of futures trading occurred with rice in 17th Century Japan.

The problem of maintaining a year- round supply of seasonal crops and products such as olive oil led to a system that evolved into the Futures Trading Markets of today. Some evidence would show a possibility that there was also trading of rice futures in China as long as 6, 000 years ago. In Japan, merchants stored rice in warehouses for future use. These were known as" rice tickets. " Eventually, these rice tickets became accepted as a kind of general commercial currency. To raise cash, warehouse owners sold receipts against the stored rice. Rules came into being to standardize the trading in rice tickets.

In the middle of the 19th Century futures trading began in the grain markets of the United States. Over time, modern futures trading grew out of these rules. The Chicago Board of Trade( CBOT) was established in 184The New York Coffee, Cotton and Produce Exchanges were born in the 1870s and 1880s. The largest are the Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and the New York Coffee, Sugar and Cocoa Exchange. Today there are ten commodity exchanges in the United States. Worldwide there are major futures trading exchanges in more than twenty countries among them Australia, Canada, New Zealand, England, Singapore and Japan, France. Also included, are products as seemingly obscure as Pork Bellies up to our now infamous Petroleum Futures.

The products traded range from agricultural staples like Corn and Wheat to Red Beans and Rubber traded in Japan. The biggest increase in futures trading activity occurred in the 1970s when futures on financial instruments, (FOREX) started trading in Chicago. Also developed as futures marketable were interest rate instruments such as United States Treasury Bonds and T- Bills. Foreign currencies such as the Swiss Franc and the Japanese Yen were first. In the 1980s futures began trading on stock market indexes such as the S& P 50Other Derivatives followed. Very few of these new markets survive and grow into viable trading vehicles.

The world wide exchanges are constantly looking for new products on which to trade futures. A few examples of less than successful markets attempted in recent years are Tiger Shrimp and Cheddar Cheese. It regulates the futures exchanges, money managers and, brokerage firms commodity advisors. Futures trading is regulated by the Department of Agriculture in an agency called the Commodity Futures Trading Commission. Copyright� C. Ellsworth 2006

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