Editing Futures exchange (section)

==History==
===Ancient times===
In Ancient Mesopotamia, around 1750 BC, the sixth Babylonian king, [[Hammurabi]], created one of the first legal codes: the [[Code of Hammurabi]].

Hammurabi's Code allowed sales of goods and assets to be delivered for an agreed price at a future date; required contracts to be in writing and witnessed; and allowed assignment of contracts. The code facilitated the first derivatives, in the form of forward and futures contracts. An active derivatives market existed, with trading carried out at temples.<ref>Archived at [https://ghostarchive.org/varchive/youtube/20211211/kd2pE5s33Qg Ghostarchive]{{cbignore}} and the [https://web.archive.org/web/20200425021624/https://www.youtube.com/watch?v=kd2pE5s33Qg&gl=US&hl=en Wayback Machine]{{cbignore}}: {{cite AV media|url=https://www.youtube.com/watch?v=kd2pE5s33Qg|title=A History of Derivatives: Ancient Mesopotamia to Trading Places, by Edmund Parker & Geoffrey Parker|date=17 December 2014|work=YouTube}}{{cbignore}}</ref>

One of the earliest written records of futures trading is in [[Aristotle]]'s ''[[Politics (Aristotle)|Politics]]''. He tells the story of [[Thales]], a poor philosopher from [[Miletus]] who developed a "financial device, which involves a principle of universal application". Thales used his skill in forecasting and predicted that the olive harvest would be exceptionally good the next autumn. Confident in his prediction, he made agreements with local [[Olive oil extraction#Olive presses|olive-press]] owners to deposit his money with them to guarantee him exclusive use of their olive presses when the harvest was ready. Thales successfully negotiated low prices because the harvest was in the future and no one knew whether the harvest would be plentiful or pathetic and because the olive-press owners were willing to [[Hedge (finance)|hedge]] against the possibility of a poor yield. When the harvest-time came, and a sharp increase in demand for the use of the olive presses outstripped supply (availability of the presses), he sold his future use contracts of the olive presses at a rate of his choosing, and made a large amount of money.<ref>Aristotle, Politics, trans. Benjamin Jowett, vol. 2, The Great Books of the Western World, book 1, chap. 11, p. 453.</ref> This is a very loose example of futures trading and, in fact, more closely resembles an [[option contract]], given that Thales was not obliged to use the olive presses if the yield was poor.

===Modern era===
The first modern organized futures exchange began in 1710 at the [[Dojima Rice Exchange]] in [[Osaka]], Japan.<ref>{{cite web|url=http://www.encyclopedia.com/doc/1G1-70742768.html|title=Bill of Exchange facts, information, pictures - Encyclopedia.com articles about Bill of Exchange|website=www.encyclopedia.com|access-date=19 April 2018|archive-date=19 May 2010|archive-url=https://web.archive.org/web/20100519150305/http://www.encyclopedia.com/doc/1G1-70742768.html|url-status=live}}</ref>

The London Metal Market and Exchange Company ([[London Metal Exchange]]) was founded in 1877, but the market traces its origins back to 1571 and the opening of the [[Royal Exchange, London]]. Before the exchange was created, business was conducted by traders in London [[coffee house]]s using a makeshift ring drawn in chalk on the floor.<ref name=Today>BBC Radio 4 ''[[Today (BBC Radio 4)|Today]]'', broadcast 25 October 2011.</ref> At first only [[copper]] was traded. [[Lead]] and [[zinc]] were soon added but only gained official trading status in 1920. The exchange was closed during [[World War II]] and did not re-open until 1952.<ref>The exchange was closed during World War II and did not re-open until 1952  http://blog.steinerelectric.com/2014/04/what-is-the-london-metals-exchange/ {{Webarchive|url=https://web.archive.org/web/20150511183159/http://blog.steinerelectric.com/2014/04/what-is-the-london-metals-exchange/ |date=2015-05-11 }}</ref> The range of metals traded was extended to include [[aluminium]] (1978), [[nickel]] (1979), [[tin]] (1989), aluminium alloy (1992), [[steel]] (2008), and minor metals [[cobalt]] and [[molybdenum]] (2010). The exchange ceased trading [[plastics]] in 2011. The total value of the trade is around $11.6 trillion annually.<ref>{{cite web |title=LME achieves another year of record volume |url=http://lme.com/6935.asp |date=5 January 2009 |publisher=London Metal Exchange |access-date=29 July 2009 |url-status=dead |archive-url=https://web.archive.org/web/20090401031016/http://www.lme.com/6935.asp |archive-date=1 April 2009 }}</ref>

[[Chicago]] has the largest future exchange in the world, the [[CME Group]]. The CME Group's oldest exchange was founded in 1848. Chicago is located at the base of the [[Great Lakes]], close to the farmlands and cattle country of the [[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 (finance)|hedge]]. In March 2008 the CME announced its acquisition of NYMEX Holdings,&nbsp;Inc., the [[parent company]] of the New York Mercantile Exchange and Commodity Exchange. CME's acquisition of NYMEX was completed in August 2008.

For most exchanges, forward contracts were standard at the time. However, forward contracts were often not honored by either the buyer or the seller. For instance, if the buyer of a [[Maize|corn]] forward contract made an agreement to buy corn, and at the time of delivery the price of corn differed dramatically from the original contract price, either the buyer or the seller would back out. Additionally, the forward contracts market was very illiquid, and an exchange was needed that would bring together a market to find potential buyers and sellers of a commodity instead of making people bear the burden of finding a buyer or seller.

In 1848 the [[Chicago Board of Trade]] (CBOT) was formed. Trading was originally in [[forward contract]]s; the first contract (on corn) was written on March 13, 1851. In 1865 standardized [[futures contract]]s were introduced.

The Chicago Produce Exchange was established in 1874, renamed the [[Chicago Butter and Egg Board]] in 1898 and then reorganized into the [[Chicago Mercantile Exchange]] (CME) in 1919. Following the end of the [[Bretton Woods system|postwar international gold standard]], in 1972 the CME formed a division called the [[International Monetary Market]] (IMM) to offer futures contracts in foreign currencies: [[British pound]], [[Canadian dollar]], [[German mark]], [[Japanese yen]], [[Mexican peso]], and [[Swiss franc]].

In 1881 a regional market was founded in [[Minneapolis, Minnesota]], and in 1883 introduced futures for the first time. Trading continuously since then, today the [[Minneapolis Grain Exchange]] (MGEX) is the only exchange for hard red spring wheat futures and options.<ref name=MGEX>{{cite web | author= MGEX via U.S. Futures Exchange | title= Minneapolis Grain Exchange | year= 2007 | url= http://www.usfe.org/minneapolis-grain-exchange.asp | access-date= 2007-03-28 | archive-date= 2007-09-29 | archive-url= https://web.archive.org/web/20070929081020/http://www.usfe.org/minneapolis-grain-exchange.asp | url-status= live }} and {{cite web | author= Minter, Adam | title= Gimme Grain! | publisher= The Rake | url= http://www.rakemag.com/stories/section_detail.aspx?itemID=19477&catID=146&SelectCatID=146 | date= August 2006 | url-status= dead | archive-url= https://web.archive.org/web/20070928011743/http://www.rakemag.com/stories/section_detail.aspx?itemID=19477&catID=146&SelectCatID=146 | archive-date= 2007-09-28 }} and {{cite web | title= Buyers & Processors | publisher= North Dakota Wheat Commission | year= 2007 | url= http://www.ndwheat.com/buyers/default.asp?ID=294 | access-date= 2007-03-29 | archive-url= https://web.archive.org/web/20071011095924/http://ndwheat.com/buyers/default.asp?ID=294 | archive-date= 2007-10-11 | url-status= dead }}</ref>

Futures trading used to be very active in India in the early to late 19th Century in the Marwari business community.<ref>{{cite web|url=http://marwarienterprise.blogspot.sg/2013/09/occupations-commodities-trading.html|title=OCCUPATIONS - Commodities Trading & Speculation - Opium|website=marwarienterprise.blogspot.sg|date=September 2013|access-date=19 April 2018|archive-date=19 April 2018|archive-url=https://web.archive.org/web/20180419120921/http://marwarienterprise.blogspot.sg/2013/09/occupations-commodities-trading.html|url-status=live}}</ref> Several families made their fortunes in opium futures trading in Calcutta and Bombay. There are records available of standardized opium futures contracts made in the 1870-1880s in Calcutta.<ref>{{cite web|url=https://tradingpithistory.com/2014/09/opium-futures/|title=Opium futures|website=tradingpithistory.com|access-date=19 April 2018|archive-date=19 April 2018|archive-url=https://web.archive.org/web/20180419121113/https://tradingpithistory.com/2014/09/opium-futures/|url-status=dead}}</ref> There are strong grounds to believe that commodity futures could have existed in India for thousands of years before then, with references to the existence of market operations similar to the modern day futures market in Kautilya's ''[[Arthashastra]]'' written in the 2nd century BCE. The first organised futures market was established in 1875 by the Bombay Cotton Trade Association to trade in cotton contracts. This occurred soon after the establishment of trading in cotton Futures in UK, as Bombay was a very important hub for cotton trade in the British Empire.<ref>{{cite web|url=http://rbgcommodities.com/commodity_future_india.html|title=RBG-commodities LIMITED|website=rbgcommodities.com|access-date=19 April 2018|archive-date=14 June 2021|archive-url=https://web.archive.org/web/20210614173922/http://rbgcommodities.com/commodity_future_india.html|url-status=dead}}</ref> Futures trading in raw jute and jute goods began in Calcutta with the establishment of the Calcutta Hessian Exchange Ltd., in 1919. In modern times, most of the futures trading happens in the [https://web.archive.org/web/20070202003226/http://www.nmce.com/ National Multi commodity Exchange] (NMCE) which commenced futures trading in 24 commodities on 26 November 2002 on a national scale. Currently (August 2007) 62 commodities are being traded on the NMCE.

===Recent developments===
The 1970s saw the development of the [[financial future]]s contracts, which allowed trading in the future value of [[interest rate]]s. These (in particular the 90‑day [[Eurodollar]] contract introduced in 1981) had an enormous impact on the development of the [[interest rate swap]] market.

The London International Financial Futures Exchange (LIFFE) was launched in 1982, to take advantage of the removal of currency controls in the UK in 1979. The exchange modelled itself after the Chicago Board of Trade and the Chicago Mercantile Exchange. LIFFE was acquired by Euronext in 2002, which in turn was acquired by NYSE in 2006. The combined NYSE Euronext, including LIFFE, was purchased by ICE in 2014.

Today, the futures markets have far outgrown their agricultural origins. With the addition of the [[New York Mercantile Exchange]] (NYMEX) the trading and [[Hedge (finance)|hedging]] of financial products using futures dwarfs the traditional commodity markets, and plays a major role in the [[global financial system]], trading over $1.5&nbsp;trillion per day in 2005.<ref>Notional volume in interest rate derivatives for 2005 was nearly $1.5 trillion, 85% of which came from 260 institutions trading more than $1 billion each http://www.investopedia.com/articles/optioninvestor/07/derivatives_retail.asp {{Webarchive|url=https://web.archive.org/web/20150211031239/http://www.investopedia.com/articles/optioninvestor/07/derivatives_retail.asp |date=2015-02-11 }}</ref>

The recent history of these exchanges (Aug 2006) finds the [[Chicago Mercantile Exchange]] trading more than 70% of its futures contracts on its "Globex" trading platform and this trend is rising daily. It counts for over $45.5&nbsp;billion of nominal trade (over 1&nbsp;million contracts) every single day in "[[electronic trading]]" as opposed to [[open outcry]] trading of futures, options and derivatives.

In June 2001 [[Intercontinental Exchange]] (ICE) acquired the [[International Petroleum Exchange]] (IPE), now ICE Futures, which operated Europe's leading open-outcry energy futures exchange. Since 2003 ICE has partnered with the Chicago Climate Exchange (CCX) to host its electronic marketplace. In April 2005 the entire ICE portfolio of energy futures became fully electronic.

In 2005, The [[Africa Mercantile Exchange]] (AfMX®) became the first African commodities market to implement an automated system for the dissemination of market data and information online in real-time through a wide network of computer terminals. As at the end of 2007, AfMX® had developed a system of secure data storage providing online services for brokerage firms. The year 2010, saw the exchange unveil a novel system of electronic trading, known as After®. After® extends the potential volume of processing of information and allows the Exchange to increase its overall volume of trading activities.

In 2006 the [[New York Stock Exchange]] teamed up with the Amsterdam-Brussels-Lisbon-Paris Exchanges "Euronext" electronic exchange to form the first transcontinental futures and options exchange. These two developments as well as the sharp growth of internet futures trading platforms developed by a number of trading companies clearly points to a race to total internet trading of futures and options in the coming years.{{Original research inline|date=September 2010}}

In terms of trading volume, the [[National Stock Exchange of India]] in [[Mumbai]] is the largest single-stock futures trading exchange in the world.<ref>{{cite web |url=http://www.tribuneindia.com/2007/20071129/biz.htm#2 |title=NSE world's top bourse in futures trading |work=tribuneindia.com |access-date=2007-11-28 |archive-date=2007-12-01 |archive-url=https://web.archive.org/web/20071201100003/http://www.tribuneindia.com/2007/20071129/biz.htm#2 |url-status=live }}</ref>