Futures industry: A story of crisis and opportunity

Chicago’s rich endowment includes both its geography and its many financial and intellectual risk-takers, dating from the 19th century through today. The city’s endowment led to the development of the futures industry, sustained the industry during adverse times and continues to play out in new and unique ways.

A significant part of the history of U.S. futures markets includes the story of Chicago innovation.  Once Chicago became a transportation hub and grain terminal in the mid-1800s, grain merchants had to figure out how to manage the price risk for their accumulating volume of grain inventories, which one creative author referred to as “prairie gold.”  Eventually in 1848, the solution was the formation of an exchange: The Chicago Board of Trade (CBOT), whose function gradually evolved from arbitrating commercial disputes and spot trading to bilateral forward trading, and finally to becoming a member-owned exchange with standardized futures contracts.    

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