Futures markets for grain emerged in Chicago inthe middle of the 19th century and spread rapidly to other commodities and centers.Forward contracts, in which two agents agree on the details of the beginnings ofcommerce itself, but the distinctive feature of futures markets is that thecontracts are standardized, transactions costs minimized, and liquidity ishigh, so that contracts can be, and typically are, bought and sold many timesduring their lifetime, in contrast to most forward contracts. The standard explanationfor the role of futures markets is that they help to spread and hence reduce risks,and to motivate the collection and dissemination of relevant information. Forwardmarkets provide the same risk-sharing opportunities, but the greatertransparency and liquidity of futures markets makes the latter far more potentinstitutions for “price discovery”.