ABSTRACT
Derivative markets were another portion of the financial markets that came under scrutiny during the subprime meltdown and became a target for added regulation.1 Those instruments trace their history to the development of futures trading on the Chicago Board of Trade (CBOT). Trading occurred there before the Civil War in standardized contracts that called for the delivery of grain in Chicago-area warehouses. Standardizing contract terms allowed grain merchants to offset buy and sell obligations, giving rise to a trading market in those contracts. As in the New York Stock Exchange (NYSE), an important aspect of the history of the futures markets was the desire of their members to limit trading to recognized exchanges, eschewing any form of over-thecounter (OTC) trading. In 1873, CBOT adopted regular trading hours for futures transactions and declared that all transactions executed by its members after hours were unenforceable. This was an effort to confine futures trading to the trading floor. However, the Chicago Open Board of Trade, a competing exchange, allowed trading after hours, and a curb market was operating in the streets of Chicago.
