Commodity Trading – Chapter 1: History of Commodity Trading

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Updated: Mar 5, 2019, 13:14 UTC

Unbelievably Futures Trading dates back to 17th Century Japan. The first ever case noted concerned rice. However, there is also evidence that rice futures

Commodity Trading – Chapter 1: History of Commodity Trading

Unbelievably Futures Trading dates back to 17^th Century Japan. The first ever case noted concerned rice. However, there is also evidence that rice futures were traded in China as far back as 6,000 years ago.

Future trading is a natural progression of things in response to the difficulties of maintaining a year round supply of products which are dependable on seasons like agricultural crops. In ancient Japan, rice used to be stored in warehouses for future consumption by the rice merchants. To raise funds, these merchants would then sell their “rice tickets” (receipts of the stored rice). Later, these rice tickets came to be regarded as a sort of all-purpose currency. As trading in rice tickets became more widespread, rules to standardize the trading of these rice tickets were introduced. In a way, these rules were akin to the current rules of the US Futures trading.

Futures trading began in the US only towards mid 1800s. The Chicago Board of Trade (CBOT) was setup in 1848. The New York Coffee, Cotton and Produce exchanges were only established in the 1870s and 1880s. Up to today, there are already ten commodity exchanges established in the US, with the CBOT being the largest. The other established exchanges are The Chicago Mercantile Exchange, New York Mercantile Exchange, New York Commodity Exchange and New York Coffee, Sugar and Cocoa Exchange.

Globally, there are Futures trading exchanges in more than twenty countries with the major exchanges being located in:

Australia
Canada
England
France
Singapore
Japan
New Zealand

The commodities which are traded on these exchanges range from agricultural products like Corn, Wheat, Red Beans to Rubber.

In the US, Futures trading is regulated by a Department of Agriculture’s sub agency known as the Commodity Futures Trading Commission. It has regulatory authority over commodity advisors, brokerage firms, futures exchanges and money managers.

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