The history of futures trading, from rice bills to micro contracts

Forwards before exchanges

Farmers and merchants have always faced the same problem: the price when you plant or buy is not the price when you harvest or sell. A forward contract is the oldest fix, a private agreement to trade a set quantity at a set price on a future date. Such agreements are ancient, and Aristotle’s story of Thales cornering the olive presses of Miletus is the oft-told early anecdote of someone profiting from a kind of option on a future harvest.

The documentary trail is long. Histories of the industry often cite provisions in the Code of Hammurabi as early regulation of delivery agreements, and the merchant fairs of medieval Europe ran on credit and forward delivery. In 17th-century Amsterdam, then the world’s busiest commercial city, traders dealt in forward contracts on goods and shares, and the Dutch tulip mania of the 1630s was largely a forward market: bulbs were promised for future delivery at prices that collapsed before most bulbs changed hands.

Forwards have a weakness. Each one is custom, each depends on the other party honoring the deal, and neither can easily be passed to someone else. Two ideas turned forwards into futures: standardizing the contract so anyone can trade it, and a clearinghouse so strangers can trade it safely. Both were invented more than once, first in Osaka and then, independently, in Chicago.

Dojima: the first futures market, Osaka 1730

In Edo-period Japan, feudal domains collected taxes in rice, shipped it to Osaka, and sold it through warehouses that issued rice bills, notes promising delivery of rice. Those bills were actively traded by the late 1600s, and the market settled in the Dojima district around 1697. In 1730 the Tokugawa shogunate officially authorized a spot market in rice bills and a futures market in representative grades of rice, traded on a book.

Japan Exchange Group calls Dojima the forerunner of organized futures exchanges. The market was banned in 1869 during the Meiji upheaval, revived in 1871, and its successor was abolished in 1939 under the wartime controlled economy. One caution for readers of trading books: popular accounts credit an 18th-century Dojima rice trader named Munehisa Homma with inventing candlestick charting; the exchange itself is well documented, but the candlestick attribution rests on much later writings, so treat it as legend rather than record.

According to Japan Exchange Group’s own history, the Dojima Rice Exchange looked strikingly modern:

• A membership system and a clearing function, much like a modern exchange.
• A spot market in rice bills alongside a futures market in standardized grades of rice.
• Prices carried across hundreds of kilometers by couriers and flag signals, an early market-data network.

Chicago standardizes the contract, 1848 to 1865

The Chicago Board of Trade was founded on April 3, 1848 as a cash market for grain, and forward or “to-arrive” contracts began trading there almost immediately, according to the CFTC’s official history. Chicago sat where prairie grain met the rails and the lake ships, so the price risk of an entire harvest flowed through one city.

The to-arrive contract still had the old problems: custom terms and counterparty risk. The fixes came in stages:

• 1859: a corporate charter gave the CBOT self-regulatory authority, standardized grain grades, and exchange-appointed inspectors.
• October 13, 1865: formal trading rules covering margin and delivery turned the to-arrive agreement into what we now call a futures contract.
• 1868: a rule banning corners, schemes to trap sellers by controlling the deliverable supply, which the CFTC’s chronology calls the first known regulatory attempt to deter manipulation.
• 1870: the first octagonal trading pit, built to hold the growing crowd.
• 1883: the first clearing organization for CBOT contracts, initially voluntary, beginning the clearinghouse model that still guarantees exchange-traded futures.

From butter and eggs to the CME

Standardization changed who could participate. Once a contract is identical for everyone, a trader who never intends to touch grain can buy it from a farmer’s buyer and sell it to a miller’s broker. The contract becomes a financial instrument, and the exchange becomes a price-discovery machine rather than a marketplace for physical goods.

The CBOT’s great rival started small. The Chicago Butter and Egg Board was founded in 1898, and in 1919 it was renamed the Chicago Mercantile Exchange, per the CFTC’s chronology. Where the CBOT ruled grains, the CME built its name in perishables and livestock, launching futures on frozen pork bellies in 1961, the first futures contract on stored meat.

For more than a century the two exchanges sat blocks apart in Chicago and competed contract by contract. That rivalry produced most of the innovations in the rest of this article, until it ended the way exchange rivalries tend to end: in a merger.

Regulation arrives, 1922 to 1974

Federal oversight followed repeated manipulation scandals. The Grain Futures Act of 1922 was the first durable federal law over the futures trade, after courts struck down an earlier attempt. The Commodity Exchange Act of 1936 broadened it beyond grains to a list of commodities that included cotton, butter, and eggs, and it remains the foundation of US futures law today.

By the early 1970s futures were spreading far beyond farm goods, and the small Agriculture Department bureau that administered the law was outgrown. The Commodity Futures Trading Commission Act of 1974 created the CFTC as an independent agency with wider powers. Every US futures contract approval, position limit, and manipulation case since then runs through that 1974 decision.

Financial futures change everything, 1972 to 1982

When the postwar system of fixed exchange rates collapsed in the early 1970s, currencies began to float and a whole new kind of price risk appeared. In 1972 the CME launched the first financial futures, contracts on seven foreign currencies, traded through its new International Monetary Market. A futures contract on money itself was a radical idea, and it worked. The CBOT followed in 1975 with the first interest-rate futures, on Government National Mortgage Association certificates.

Timing mattered. The 1970s brought oil shocks, double-digit inflation, and violent swings in interest rates, so banks, lenders, and bond dealers suddenly needed to hedge rate risk the way farmers hedged wheat. CME’s own history describes the exchanges quickly adding Treasury bond, Treasury bill, and Eurodollar futures through the late 1970s and early 1980s. Financial futures were no longer an experiment; they were the growth engine.

Two decisions in late 1981 and early 1982 unlocked everything after:

• December 8, 1981: the CFTC approved the first cash-settled futures contract, the CME’s Eurodollar. Cash settlement made index futures possible, because you cannot deliver a stock index.
• December 1981: the Shad-Johnson Accord settled jurisdiction between the CFTC and the SEC over the coming wave of stock index products.
• February 16, 1982: the CFTC approved the first stock index future, on the Value Line Average at the Kansas City Board of Trade.
• Weeks later, 1982: the CME launched futures on the S&P 500, per its own history. The Value Line contract, with little money benchmarked to it, dwindled and was eventually delisted; the S&P 500 complex grew into one of the most traded futures in the world.

Screens, mergers, and the shrinking contract, 1992 to 2019

The first electronic futures trades ran on CME Globex in 1992, and the screen’s takeover of the pit is a story of its own, told in from trading pits to screens. The pivotal product came in September 1997. The pit-traded S&P 500 future had a $500 multiplier, a notional value above $500,000, and margin above $25,000, far beyond most individual traders. The CME’s answer was the E-mini S&P 500: one fifth the size, traded only electronically on Globex. It traded more than 7,000 contracts on its first day, reached about 80,000 a day within three years, and now trades near two million contracts a day, per CME’s account.

The exchanges consolidated at the same time. The CME acquired the CBOT in 2007 to form CME Group, added the New York Mercantile Exchange in 2008 for energy and metals, and absorbed the Kansas City Board of Trade’s wheat contract in 2012. Then, on May 6, 2019, CME Group launched Micro E-mini futures on the S&P 500, Nasdaq-100, Russell 2000, and Dow, each one tenth the size of the corresponding E-mini. The arc of 170 years runs in one direction: bigger exchange, smaller contracts, wider access.

That entire lineage, from the pit-size S&P contract to the Micro E-mini, is what a modern desktop terminal trades today. Aeris charts these contracts live through your own Rithmic account, on the same Sunday-to-Friday sessions that electronic trading created.

Why this history shapes your screen today

None of this is trivia. The contract you trade today is a stack of historical decisions:

• Fixed quantity, tick size, and delivery months descend from the CBOT’s 1865 standardization.
• Cash settlement, the reason index futures exist at all, dates to the 1981 Eurodollar decision.
• The $50 E-mini and $5 micro multipliers are the answers from 1997 and 2019 to contracts that had grown too large for individual traders.
• The nearly round-the-clock, Sunday-to-Friday session exists because electronic trading freed markets from pit hours, and circuit breakers and trading pauses trace to the reforms that followed the 1987 crash. Position limits and federal oversight trace to 1922 and 1974.

Where Aeris fits

Every specification above is a working detail in Aeris today. The terminal is native on Windows and macOS and charts live futures through your own Rithmic account, from the E-mini S&P 500 down to the Micro E-mini contracts that 2019 made possible, with the tick values and session times this history produced.

If you want to feel the 1997 and 2019 sizing decisions in practice, the free futures position size calculator on this site converts tick values and stop distance into whole contract counts for mini and micro contracts alike, no account needed. Inside Aeris, a simulated practice account lets you learn a contract’s rhythm before any live order leaves your machine.

The history of futures is a history of risk being standardized, cleared, and made accessible one step at a time. The tools keep changing. Managing the risk stays the trader’s job.