While advancements in futures trading have intensified in the 21st century, this financial industry sector has a diverse and rich history. The history of the futures markets in the US centers on how people continuously tried to enhance the efficiency of the commercial sector. Read on to learn more!

A Quick Look into How Commodity Futures Markets Began in the US
By the 1840s, telegraph and railroad lines connected Chicago to the East, transforming the city into an economic hub.

The invention of the McCormick reaper during the same period led to an increase in wheat yield. Farmers from the Midwest traveled to Chicago to market their wheat to brokers, who distributed it nationwide.

Framers transported their wheat to Chicago, hoping to sell it for a profit. The city had limited grain warehouses and no standardized grain sorting or weighing processes. Therefore, the farmer was frequently at the mercy of their broker.

However, in 1848, the Chicago Board of Trade (CBOT) was established, where farmers and brokers could meet to exchange cash for prompt commodity delivery, also known as a forward contract. Their initial forward contract was corn. By 1865, the board had developed a standardized process for futures contracts.

Over the years, the CBOT changed its title before settling on Chicago Mercantile Exchange (CME) in 1919. The CME acquired NYMEX Holdings, Inc., the majority owner of the New York Mercantile Exchange and Commodity Exchange, in 2008, solidifying its position as the world’s biggest futures exchange.

How Commodity Futures Evolved into What They Are Today?
As we recognize them today, the futures contracts evolved as cultivators (sellers) and traders (buyers) started to pledge to forthcoming grain-for-cash dealings.

For example, the cultivator and the trader would negotiate a price for the delivery of 10,000 bushels of grain at the end of the month.

Such agreements benefited both parties. The farmer was aware of the price they would receive for their wheat, and the buyer was aware of their expenses. Moreover, the parties could sometimes exchange a formal contract and a modest sum of money as a ‘guarantee’ to honor their agreement.

These contracts became popular and were even utilized as security for bank loans. Additionally, they started shifting hands prior to the date of delivery. If the trader decided he did not desire the wheat, he could sell the contract to another buyer. Alternatively, the farmer who does not wish to provide his wheat could transfer their responsibility to another farmer.

The price would fluctuate based on wheat market conditions. If terrible weather occurred, those who had agreed to sell wheat would have more value contracts since the supply would be reduced. Similarly, if the crop harvest was more than anticipated, the seller’s contract will be worth less.

Before long, wheat contracts were being traded by individuals who had no interest in ever purchasing or selling wheat. These individuals were speculators whose goal was to make money by purchasing low and selling high or selling high and purchasing low.

The emergence of adjustable exchange rates and increased inflation popularized the futures markets further. As global economic uncertainty increased, more individuals would try to hedge their stakes in futures trading. As a result, financial futures markets began diversifying to include more futures options besides agricultural commodities.

What Are the Major Commodity Future Markets?
As with other global markets, commodity futures’ open interest and volumes shift in response to economic, political, and natural occurrences, such as the weather. A Midwestern famine, for instance, could yield agricultural futures with strong trends, drawing investment from other futures markets.

Volatility rises and declines steadily over long periods because commodity trends emerge gradually and can continue for years or even decades, as opposed to weeks or months.

As of the close of trading on August 2nd 2022, listed below are the top commodity futures:
· Crude oil futures
· Corn futures
· Natural gas
· Soybeans
· Gold

What Exactly Is a Futures Contract?
Futures contracts are agreements between two parties to acquire and sell a specific item in a fixed quantity and at a pre-agreed price at a specific date in the future.

Payment and delivery of this asset take place on the ‘delivery date,’ which is highlighted in the contract. The individual who invests in the futures contract is referred to as holding a long position, whereas the seller has a short position. In short, one can use futures contracts to protect against risk or speculate on price movements.

These futures contracts are kept on an established stock exchange. The exchange mediates and facilitates communication between the buyer and seller. However, the exchange requires both parties to fund a margin account initially as a condition of entering a contract.

Considering futures prices are likely to fluctuate daily, price variations are adjusted daily using the margin. If the margin gets depleted, the contracting party must deposit additional funds into the account, also known as tagging to market. Therefore, only the current market price is utilized to calculate the difference on the contract delivery date as all other variations are already settled.

The inherent asset in your futures contract can be one or more of the following:
· Commodities (domestic and international) such as Gold, Wheat, Silver, Sugar, Corn, Cotton, Crude Oil, Palm Oil
· Currencies
· Bonds; US treasury bonds
· Equities; indices
· Interest rates; kibor


What Are the Best Futures Trading Platforms?
What constitutes a fantastic broker for futures trading? Essentially, they must provide reasonable futures fees. Second, they should provide access to numerous exchanges, such as CME, NYMEX, CBOT, and more.

Another important consideration is an excellent desktop platform that facilitates easy technical analysis. Additionally, brokers should have good general service quality and scores, such as little-to-no withdrawal fees, high safety ratings, and excellent customer service.

Here are some of the most recognized futures trading platforms worldwide:
· TD Ameritrade
· Charles Schwab
· Interactive Brokers
· TradeStation
· Tradovate
· Discount Trading
· NinjaTrader
· Tickmill
· Generic Trade
· Optimus Futures

Conclusion
Futures trading in the US dates back to the 19th century, when merchants exchanged advance contracts.

These merchants all desired the same thing: to lock in a set price now and avoid uncertainty tomorrow. On the other hand, futures contracts attempted to purchase at a low set price today, hoping that future prices would rise.

With time, the futures market expanded to incorporate more futures markets and options that dominate today’s exchanges.

While futures trading is now available worldwide, the US remains the focal point, thanks to heavy trading on the US bond and wheat market.