A commodity is essentially an article of commerce. Of late many things have been commoditized – social services, for example. However, in finance, the commodity market is a special type of market where only physical products and raw materials are exchanged. Before invention of money, barter or commodity exchange was the usual form of commodity trading, and probably originated in Sumeria. At times commodities were traded for an I.O.U., obliging the other party to redeem the promise of paying the first party through financial instrument or some other commodity. Commodities market became complex and global even in ancient times when animals, gold, silver, seeds, spices and other things were traded across the seas. Today, global commodities markets are one of the largest centers of commerce. Regulation of practices is done by national bodies, and some guidelines are formulated by international associations.
The concept of Futures is a little different. While most transactions are conducted in the present, futures trading is conducted in anticipation of a future prospect. Thus, a futures contract is the obligation of buying or selling a certain product or service at a future date at an agreed upon price. The futures market is a risky market as anticipating the price at a future date is difficult, but is done with the expectation of benefit. As such, futures contracts are traded by two groups of people – hedgers, who include producers and consumers, and speculators who are after a profit. Like in other markets, futures market is also heavily regulated as things are fast evolving.
Today’s financial transactions are immensely complicated processes, and the old world definition of transaction as involving only two parties, is no longer valid. A dozen services facilitate any transaction and all are active players in the vending or consumption of products and services.