in developing markets these data should be collected with consideration toward improving standardization of many of the aspects of the product, which can help to increase transparency, improve efficiency, and reduce uncertainty. for example, the recovery of the cmo market was aided by improved information and modeling, which increased confidence, especially as products became increasingly standardized. standardization in the terms and in the contractual rights and obligations of purchasers and sellers of the product reduces, but does not eliminate, the need for market participants to engage in extensive efforts to obtain information and reduces the need to verify the information that is provided in the market through due diligence. reduced information costs, in turn, lower transaction costs, thereby facilitating price discovery and enhancing market liquidity. also, standardization can reduce legal risks because litigation over contract terms can result in case law that applies to similar situations, thus reducing uncertainty. the benefits of the development of standardization for enhancing the liquidity of financial markets have a long history. one particularly clear example dates back to the development of exchange - traded commodities futures contracts in the mid - 1800s. the standardization of the futures markets improved the flow of information to market participants, reducing transaction costs and fostering the emergence of liquid markets. 2 in the mid - 1850s, the market for grain did not enjoy the very deep liquidity we see in today's market. at the time, chicago was facing competition from exchanges in minneapolis and st. louis and from some in europe that had created innovative structures to make markets more liquid. to create a liquid market for grain trading, buyers and sellers of grain needed a way of systematically analyzing the different kinds of grain that came into the exchange from different sources. in other words, the market needed a way to " grade the grain. " the market created special silos that combined grain from a number of sources. buyers no longer bought a silo of grain from one source ; a silo, for example, of " winter wheat number 2 " would be graded in a way that allowed buyers to know exactly what they were getting. standardization and related controls reduced traders'information requirements and, thus, their transaction costs. the board of trade established minimum quality standards based on the need for market participants to evaluate the reliability of promises of future deliveries of grain to the buyer. in 1865, the chicago board of trade standardized the delivery dates for the contracts, thus fostering the emergence of liquid markets in which traders could readily hedge the risk of price changes in the commodities and contracts. buyers and sellers

as implementation of the community reinvestment act and expansion of our oversight of foreign banks operating in the us pursuant to the foreign bank supervision enhancement act of 1991 ) the congress assigns to us. to carry out this multi - faceted mission, the congress established a highly decentralized federal reserve system with a complex governance structure. leadership and direction are vested in the board of governors, but only about 1, 700 staff ( out of about 24, 900 ) work for the board in washington. the regional reserve banks carry out the bulk of operations and have substantial autonomy. as a result, planning and resource allocation at the federal reserve have historically been quite decentralized, and major changes have required painstaking consensus building across the board / bank structure. the regional structure of the federal reserve is one of its great strengths. the twelve regional federal banks work closely with the banks in their region and are closely tied into their regional economies. the development of federal reserve policy is greatly enriched by the in - depth knowledge that the regional banks have of the industrial, agricultural and financial forces shaping different parts of the economy. the challenge confronting strategic planning at the federal reserve is to find a balance between decentralized regional planning, which preserves the strengths of the regional structure, and the need for a more comprehensive national plan aimed at increasing efficiency by rationalizing the allocation of resources across regions and functions. in recent years, major changes have occurred in the allocation of federal reserve resources in response to unfolding events. when serious problems developed in the banking industry in the 1980s and in response to increased supervisory responsibility for foreign banking entities, more federal reserve resources were channeled into supervision and regulation. rapidly changing technology, especially telecommunications and automation, has revolutionized federal reserve operations and required considerable investment in hardware, software and expertise. consolidation of the banking industry, evolution of payment systems patterns and technology, growth in derivatives, globalization of financial services, concerns about equal credit opportunity and fair housing issues, efforts to reduce systemic risk in the payments area, and changes in monetary aggregates, have all caused planning and resource adjustments. rapid technological change has also created opportunities for system - wide efficiencies resulting from consolidation of activities in one or more reserve banks. a number of the twelve regional banks have developed specialized activities serving other regions. for example, federal reserve automation services ( fras ) is headquartered in richmond, but provides mainframe data processing and data communications services to all parts of the system. this consolidation and specialization has enabled the reserve banks