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Effects of Contract Provisions on the Success of a Futures Contract

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  • Mark J. Powers

Abstract

This article investigates the effect of contract provisions in attracting hedgers to a futures market. The new pork bellies futures contract initiated in 1961 resulted in very light trading during the first 18 months. Six provisions of the contract which caused dissatisfaction among traders were those dealing with shrinkage allowance, limitations on storage time, grades and standards, transportation allowance, methods of storage protection, and delivery time. After these provisions were revised in 1962 and 1963 in such a way as to bring them into closer correspondence with trade practices, hedger utilization increased rapidly and steadily.

Suggested Citation

  • Mark J. Powers, 1967. "Effects of Contract Provisions on the Success of a Futures Contract," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 49(4), pages 833-843.
    • Handle: RePEc:oup:ajagec:v:49:y:1967:i:4:p:833-843.
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    File URL: http://hdl.handle.net/10.2307/1236940
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    Cited by:

    1. David K. Ding & Wui Boon Lim, 2024. "Lessons from the Demise of the Brent Crude Oil Futures Contract on the Singapore Exchange," JRFM, MDPI, vol. 17(6), pages 1-22, June.
    2. Quintino, Derick David & David, Sergio Adriani, 2013. "Quantitative analysis of feasibility of hydrous ethanol futures contracts in Brazil," Energy Economics, Elsevier, vol. 40(C), pages 927-935.
    3. Foote, Richard J. & Williams, Robert R. Jr & Craven, John A., 1973. "Quarterly and Shorter-Term Price Forecasting Models Relating to Cash and Futures Quotations for Pork Bellies," Technical Bulletins 158603, United States Department of Agriculture, Economic Research Service.
    4. Bjursell, Johan & Frino, Alex & Tse, Yiuman & Wang, George H.K., 2010. "Volatility and trading activity following changes in the size of futures contracts," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 967-980, December.
    5. Paul, Allen B., 1976. "Treatment of Hedging in Commodity Market Regulation," Technical Bulletins 158109, United States Department of Agriculture, Economic Research Service.
    6. Hoang‐Long Phan & Ralf Zurbruegg, 2020. "The time‐to‐maturity pattern of futures price sensitivity to news," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(1), pages 126-144, January.
    7. Parcell, Joseph L., 2002. "Emerging Ip Markets: The Tokyo Grain Exchange Non-Gmo Soybean Contract," Working Papers 26038, University of Missouri Columbia, Department of Agricultural Economics.
    8. Fizaine, Florian, 2018. "Toward generalization of futures contracts for raw materials: A probabilistic answer applied to metal markets," Resources Policy, Elsevier, vol. 59(C), pages 379-388.
    9. Kennya B. Siqueira & Carlos Arthur B. da Silva & Danilo R.D. Aguiar, 2008. "Viability of introducing milk futures contracts in Brazil: a multiple criteria decision analysis," Agribusiness, John Wiley & Sons, Ltd., vol. 24(4), pages 491-509.
    10. Gray, Roger W. & Rutledge, David J.S., 1971. "The Economics of Commodity Futures Markets: A Survey," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(04), pages 1-52, December.
    11. Hudson, Michael A. & Hieronymus, Thomas A. & Koontz, Stephen R., 1986. "Deliveries On The Cme Live Cattle Contract: An Economic Assessment," Illinois Agricultural Economics Staff Paper 244652, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.

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