Stocks are not the only securities that are traded and New York is not the only trading capital in the United States. There also is very active trading in commodity futures, and Chicago is home to those exchanges. Like trading in stocks and other financial instruments, commodities trading has a history and tradition dating back to the mid-19th century. Commodities are defined as natural resources, especially those resources that are grown, mined and tended.

Originally, futures markets were developed to help agricultural producers and consumers manage the financial risks that came with the annual tasks of harvesting, marketing, and processing food crops. That has not changed to this day as the modern futures industry still serves those markets.

First Futures Exchange

The Chicago Board of Trade, founded in 1848 by 82 Chicago merchants, is the world’s oldest established futures exchange. Traders there dealt in what was then called “to arrive” contracts for commodities, such as flour, timothy seed, and hay. What were called “forward” contracts on corn came into being in 1851, gaining popularity with merchants and food processors.

The next big change to the commodities market came in 1898 with the founding of the Chicago Mercantile Exchange, which now has grown to become the nation’s largest futures market. At its inception, it was called the Chicago Butter and Egg Board and trading on the exchange was limited to butter and eggs.

Other Exchanges

Trading in other commodities was expanded at the end of the 1800s and the beginning of the 20th century, most with their origin tied to agriculture. Today these smaller exchanges have merged into the major Chicago markets, but there was a time when someone could trade on the National Raw Silk Exchange, the New York Hide Exchange, the Rubber Exchange of New York, or even then National Metal Exchange.

Until the 1970s, the term "futures market" and "commodities market" meant the same thing but that has become more complicated with the introduction of "futures" trading in financial instruments, such as U.S. Treasury notes and Eurodollars. Firms are still referred to as "commodity trading advisors" even though many deal exclusively with the financial futures market, not physical products, such as metals, grains, or livestock.