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Financial Innovation and Rise of Modern OTC Derivatives

In 1848, the first derivatives exchange, the Chicago Board of Trade (CBOT), was created in Chicago, USA. It is the oldest organized futures market still operating in the world. It later merged with the Chicago Mercantile Exchange in 2007 to become the CME Group.
A group of merchants had established the CBOT, originally as a centralized marketplace for exchanging grain, but it soon became a bourse where forward contracts, or so-called to-arrive contracts were negotiated. This allowed farmers to lock in their crop prices well before harvest.
Today, Chicago is considered the derivatives capital of the world. It operates the CME and CBOE derivative exchanges under the CME Group, and are designed to prevent counterparty risks. However, even the safest businesses succumbed to counterparty risks during the Great Financial Crisis of 2008, including the likes of Bear Stearns, Lehman Brothers, and many others. The crisis created a slew of systemic risks in global markets.