Futures exchange

A futures exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

History of futures exchanges

Though the origins of futures trading can supposedly be traced to Ancient Greek or Phoenician times,[citation needed] the first modern organized futures exchange began in 1710 at the Dojima Rice Exchange in Osaka, Japan.

The United States followed in the early 1800s. Chicago is located at the base of the Great Lakes, close to the farmlands and cattle country of the U.S. Midwest, making it a natural center for transportation, distribution and trading of agricultural produce. Gluts and shortages of these products caused chaotic fluctuations in price, and this led to the development of a market enabling grain merchants, processors, and agriculture companies to trade in "to arrive" or "cash forward" contracts to insulate them from the risk of adverse price change and enable them to hedge.