Securities Exchanges - Examples 2-6
December 13, 2023
New financial products evolve with the economy and the need for hedging and laying off risk, irrespective of the competitive and obsolescence risks that otherwise impact ordinary business models.
Futures and other derivatives, as they are now mostly thought of, barely existed prior to the 1970s. At that time, futures trading was for agricultural and hard commodities that could be delivered upon contract expiration: wheat, gold, pork bellies. Without exaggeration, there was no such thing as a financial futures contract. The first one approved was currency futures. Aside from it not even being a concept before then, once proposed it was highly controversial. Currency futures were thought exotic, and editorial commentary at the time even called them dangerous.
Over time, though, futures trading, across an increasingly dizzying array of assets and sub-classes, has come to dominate financial instrument trading. Because it suits the economic needs of participants, because these are superior tools for managing positions and risks than existed before. This can be seen in this series of charts from the CME marking the anniversary dates of various of its more successful futures contracts.
They all have the same look. Just to detail the first chart, of the very first financial futures in 1972: it took 15 years for FX Futures to begin approaching annual volume of 100,000 contracts. Ultimately, volume rose another 10x.
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