Select-Global – The History of Commodity Markets

The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs such as soybeans were only added quite recently in most markets.

 

Historically, dating from the ancients who used livestock, rare seashells and other items as payment "commodity money" - People have long sought ways to standardise and trade contracts.

"Commodity money" and commodity markets in a crude early form are believed to have originated in Sumer, a civilization and historical region in southern Mesopotamia (modern Iraq) where clay tokens were made in the shape of sheep or goats, then baked - this produced a hard token (a coin for want of a better word) and were used in trade.

These tokens were sealed in clay vessels with their number written on the outside, These then represented a promise to deliver on that number. This made them a form of commodity money. This was more of a commitment than what some people might think as an I.O.U but they were still less than let's say,a guarantee by a nation-state or bank. However, these casks were known to contain promises of time and date of delivery - this made them like a modern futures contract. Trust had to play an important role within this trade since regardless of the details, it was only possible to verify the actual number of tokens inside the "casks" by shaking them or by breaking them, at which point the number or terms written on the outside became subject to doubt. Eventually the tokens disappeared, but the contracts remained on flat tablets. This represented the first system of commodity accounting.

Classical civilizations such as the Greeks built complex global markets trading gold or silver for spices, cloth, wood and weapons, most of which had standards of quality and timeliness.

The trading of commodities consists of direct physical trading and derivatives trading. Exchange traded commodities have seen an upturn in the volume of trading since the start of the decade. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market.

Select Global is a leader in delivering comprehensive access to the global markets for commodities, equities, fixed income, foreign exchange and listed futures and options. A leading trader by volume, Select Global provides unparalleled levels of service to our clients.

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