Syndicate
Origins and Growth of Futures Markets
One of the earliest sections of the economic development was the evolution of the merchandise trading into to the use of money. The equal and simultaneous exchange of a good for other began to get complicated with the existence of a great number of products on the market. Before such situation, a good of reference was found to make these exchanges: money. In this way cash markets were born (spot markets) in which a sum of money represented the value of use of the product for which a good was exchanged.
Now then, the growth and evolution of the economic activity required the development of the techniques and planning through the consideration of the time factor in the economic decisions. This step is used by the markets and for it exchanges with differed deliveries of merchandises begin be negotiated. In this way the term markets (forward markets) appear.
The contracts negotiated on these markets must be adjusted in an anticipated way with all the terms of the same:
- Delivery date
- Price and modality of payment
- Definition of the quality of the product
- Procedures to follow in case of problems, etc.
The continuous growth of the economic activity impels the forward markets. These begin to need greater volumes of financing, exposing the participants to greater risks that derive from the price fluctuations and making those participants to make demands on the payment of the so called risk premium.
Its existence provokes an increase on the costs that become unbearable for the participant members of the forward markets.
The future markets are born as a solution to this problem, with the already described characteristics. The future financial markets had its origins in the decade of the 70’s at the main stock exchange markets of the world: New York, Chicago, London, Paris, Singapore, Hong Kong, etc. resulting from the raw materials future markets. They appeared as an answer to the appearance of the excessive volatility of the prices of the raw materials, types of interest, types of exchange rate, etc.