Clearing and Settlement of Derivatives

Once established, the standardisation of the terms of the contract

enabled contracts to be readily traded as what we call today ‘futures

contracts’. Thus the forerunner of today’s markets was born and

farmers or merchants who wanted to hedge against price fluctu-

ations, caused by poor or bumper harvests, bought and sold futures

contracts with traders or market makers who were willing to make a

different price for buying and selling. Speculators, who wanted to

gamble on the price going up or down without actually buying or

selling the physical grains themselves, were also attracted to the

market. Therefore