Back to the Futures: When Were Futures First Traded?

Futures are a cornerstone of financial trading across the globe. In today’s marketplace, futures are traded electronically via well-established exchanges providing convenient and easy access to futures instruments. But where did it all begin? Considering the accessibility of today’s markets, it is easy to lose sight of futures trading’s opportunistic beginnings.

Ancient Origins of Futures Trading

Prologue to the Code of Hammurabi, circa 1780 BC

The ancient Greeks are also known to have traded futures, as mentioned in Aristotle’s Politics. In this early work, Aristotle conveys the story of Thales, a poor philosopher who secured low prices on the use of olive presses at a future date based on the uncertainty of the upcoming olive harvest. When the plentiful harvest came, Thales was proved correct in his forecast and was able to sell his future use contracts of the olive presses at a much higher price than he paid.

Ancient olive press, similar to one Thales would have used

First Formal Futures Exchanges

Additionally, commodity futures markets were popping up in England throughout the 16th century. Chalk rings were drawn on the floor to serve as a designated “pit” across London coffee houses to facilitate trading. However, it was not until 1877 that the first official commodity trading exchange was founded, the London Metals and Market Exchange. Copper was the first commodity traded within the exchange followed by lead and zinc.

Chicago Board of Trade

Crowded interior of the Chicago Board of Trade, 1909

New York Mercantile Exchange and Chicago Mercantile Exchange

Manhattan’s Lower East Side, circa 1900

In 1898, the Chicago Mercantile Exchange (CME) was founded as an agriculture exchange and was first known as the Chicago Butter and Egg Board. Today, the CME has the largest open interest of any futures exchange in the world, offering futures on financial instruments, interest rates, equites, currencies and commodities.

Although first introduced as protection for farmers from a bad harvest, the trading of futures has evolved into a key component of the international financial markets. Combined with modern technology, these versatile instruments can now be leveraged by traders the world over.

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