The oldest existing futures exchange in the United States is the Chicago Board of Trade.  It was established in 1865 as a cash market in response to the need for a centralized place to bring together large numbers of buyers and sellers and to provide standards for weights and measurements as well as liquidity for the market.  Soon after its founding, brokers began dealing in ‘cash forward contracts’ in order to give buyers a reliable source of supply and sellers a year-round market.  From this, today’s futures markets evolved.  Cash forward contracts typically specified quantity, quality and delivery time.  Futures markets add price at the time the contract is made.

            The evolution of competitive market price is a major economic function of futures trading.  Available information about the future value of a particular commodity is translated into price on the trading floor.  The futures price represents the market’s best estimate of what the cash price will be at the maturity date specified on the contract.  That price is volatile and commodity exchanges typically establish a minimum amount that the price can fluctuate as well as setting a daily price limit.