Why Some Commodity (and Financial) Futures Contracts Succeed and Others Fail: A Survey of Relevant Research
Posted: 6 Mar 2015 Last revised: 15 May 2015
Date Written: October 1, 2014
Why do some futures contracts succeed and others fail? Although the U.S. futures markets have evolved in a trial-and-error fashion, a survey of relevant research suggests key elements have determined whether particular futures contracts succeeded or failed. This knowledge could be useful for new financial centers as they build successful futures markets. This paper shows that there are three elements that determine whether a futures contract succeeds or not:
1. There must be a commercial need for hedging; 2. A pool of speculators must be attracted to a market; and 3. Public policy should not be too adverse to futures trading.
Keywords: Commodities, Futures Market, Commodity Regulation, Policy
JEL Classification: G18, N22
Suggested Citation: Suggested Citation