The Development Of Futures Market
Futures trading is an important form of financial transactions. Often, futures trading covers a wide variety of asset classes, such as commodities, stocks, bonds, and currencies. Depending on the exchange and the type of underlying instrument, futures contracts may be traded by the public, by large institutional players, or by smaller professional traders.
The concept of futures trading has evolved over time, stemming back to the first organized futures governments in the 17th century. Initially, the primary focus was to facilitate the trading of agricultural commodities, as a way to help farmers and other farmers who produced the commodities to hedge their price risk. As a means of trading these commodities, traders would meet at regularly scheduled futures exchanges and agree to buy or sell the commodities at a future date with a predetermined price.
Over the centuries, the concept of futures trading has evolved from an exchange-based system to an electronic one. Today, instead of meeting in person, traders can participate in the futures market from anywhere in the world, as long as they have access to the right technology. In addition to open outcry exchanges, most of the worlds leading exchanges now offer electronic access, allowing users to trade, monitor and analyze the market without ever visiting the physical exchange.
The advancement of technology has allowed the futures market to grow tremendously. In the past, it only traded in particular commodities, such as grain and oil, which depended on the physical movements of goods to generate profits. Today, the scope of the futures markets has been greatly expanded, as they house derivatives of commodities and securities. This means that traders do not need to physically possess the underlying asset in order to trade it, but can instead use instruments such as futures contracts, options and swaps to speculate on and offset their risk in the futures market.
Furthermore, the development of technology has also enabled the creation of automated trading systems, which are designed to execute trades on behalf of their users with minimal input from the users. This has enabled individuals and institutions to manage their trading strategies more accurately, as well as increase the number of trades that can be executed in a single day.
To date, there are over 80 futures exchanges around the globe, which are either public or private. Today, the U.S. is the leader in the futures market in terms of the volume of trading. According to the Commodity Futures Trading Commission, in 2019, U.S. exchanges saw an average daily volume of over 14 million contracts of various futures and options on futures.
Overall, it is safe to say that the global futures markets have grown exponentially over the years, and will continue to do so as technology and innovation advance. By providing an opportunity for participants to hedge their risk and generate profits, the futures market is a valuable part of the global financial market.
