The financial futures market overtook futures trading in commodities in the 1980s, and this was a direct result of the increase in financial uncertainty. Dealing in this market is far less stringently supervised than is trading in commodity futures. The practice of trading in foreign currency developed in the 1960s and 1970s with dealing "forward" (a sale to be completed at an agreed to price three or six months ahead) as well as "spot" (an immediate sale). These markets were considered inflexible from the point of view of the customer, and contracts to buy and sell were tied to a specific date and were between particular buyers and sellers. Since 1972 in the United States, the financial futures markets have allowed for more general trading of futures or options on any currency's exchange rate, on government securities and thus on interest rates, or on stock-exchange indexes, meaning the general up or down movement of corporate stocks and shares. The contracts are for very large standard quantities and are to be completed on fixed delivery dates. In the meantime, such contracts can be retraded on the market (Strange, 1986, 113-114).
There are 16 exchanges in the United States today that are authorized to trade futures contracts, and futures contracts can include financial instruments. A futures contract is a standardized agreement to buy or sell a specific amount of the commodity involved at a specified price and for delivery at a future date. Such a contract creates an obligation on the part of the buyer to purchase, and on the seller to sell, the commodity. Each futures contract today is standardized with respect to quantity, quality, and month of expiration, and the trading is conducted by intermediaries for customers and by "locals" trading for themselves. Some 10 percent of all futures trading today is in foreign currencies and currency indexes. U.S. Treasury bond futures are the most heavily traded U.S. futures cont...