Brief History Of Commodity Exchanges

There is a popular belief among many historians and economists that the commodity exchange developed and evolved as a product of the ancient fairs and open-air markets of the Middle Ages. There is evidence to support the fact that the first exchange similar to those on the lines of today were established in France and England way back in the 15th , 16th and 17th centuries.

In the 19th century, US businessmen began to organize forums in the market to make the buying and selling of products easier. These marketplaces provided a place for buyers and sellers to meet and set quality standards, as well as establish rules of their business.

Agricultural products and commodities were the ones that were mostly traded but as long as there are buyers and sellers, any product and commodity can be traded. In 1872, a few dairy merchants from Manhattan got together to bring about some chaotic conditions in the New York market to a system in terms of storage, pricing, and transfer of agricultural produce.

In 1933, while suffering from the Great Depression, the Commodity Exchange, Inc. was established. It was started in New York and via the merger and amalgamation of four smaller exchanges - the National Raw Silk Exchange, the Rubber Exchange of New York, the National Metal Exchange, and the New York Hide Exchange.

The Chicago Board of Trade was the first commodity exchange in the United States of America to be opened in 1848, and is still the largest exchange as well. The futures contract was developed here in the 1860s. The New York Cotton Exchange founded in 1871 was also among few other early United States exchanges.

Following are the major exchanges in the USA.

* Chicago Board of Trade (CBOT)- The exchange deals in agricultural products such as rice, soybeans, soybean meal, soybean oil etc., and biofuels

* Chicago Mercantile Exchange (CMET) - This exchange also deals in agricultural products including cheddar cheese, butter, milk, and biofuels.

* Kansas City Board of Trade (KCBT) - Deals in wheat, options on wheat futures, other agricultural products, and natural gas options and futures.

* New York Mercantile Exchange (NYMEX) - Deals in energy, precious metals, and industrial metals

* US Futures Exchange (USFE) - Deals in energy related products

* Memphis Cotton Exchange - Deals in cotton and other agricultural products

* Minneapolis Grain Exchange - Deals in wheat, sunflower seeds, and other agricultural products, and electricity futures and options.

Other important exchanges throughout the world include the London Metal Exchange (LME) that trades in industrial metals, and plastics. The NYSE Liffe trades in agricultural products, while the European Energy Exchange (EEX) in Liepzig, Germany, trades in energy and emissions.

Every exchange has its own rules and regulations that members need to abide by. The Commodity Futures Trading Commission is the regulatory body that looks into the affairs of each exchange. The U.S. Department of Agriculture sets standards for inspection and grading of the various agricultural commodities that are offered for sale at these exchanges.