HISTORY OF DERIVATIVES MARKET:
Early forward contracts in the US., addressed merchants concerns about ensuring that there were buyers and sellers for commodities. However “credit risk” remained a serious problem. To deal with this problem, a group of Chicago business men formed the Chicago Board of Trade (CBOT) in the year 1848. The primary intention of CBOT.. was to provide a centralized location known in advance for buyers and sellers to negotiate forward contracts. In the year 1865. the CBOT.. went one step further and listed the first “Exchange Traded” derivatives contract in the US.. These contracts were called “Future Contracts”. In the year 1919. Chicago Butter and Egg Board, a spin-of of CBOT.. were recognised to allow futures trading. Its name was changed to Chicago Mercantile Exchange (CME). The CBOT.. and the CME.. remained the two largest organized futures Exchanges, indeed the two largest “Financial” Exchanges of any kind in the world Today.
The first stock index futures contract was traded at Kansas city Board of Trade. Currently the Most popular stock index futures contract in the world is based on S & P 500 index, traded on Chicago Mercantile Exchange. During the Mid 1980s financial futures became the most active derivative instruments generating volumes many times more than the commodity futures. Index Futures. Futures on T-Bills and Euro-Dollar Futures are the three most popular futures contracts traded today. Other popular International exchanges that trade derivatives are LIFFE in England. DTB.. in Germany, SGX ., in Singapore.
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