Editing Normal backwardation (section)

==Origin of term: London Stock Exchange==
Like [[contango]], the term originated in mid-19th century England, originating from "backward".

In that era on the [[London Stock Exchange]], backwardation was a fee paid by a seller wishing to defer delivering stock they had sold.  This fee was paid either to the buyer, or to a third party who lent stock to the seller.

The purpose was normally speculative, allowing [[short selling]].  Settlement days were on a fixed schedule (such as fortnightly) and a short seller did not have to deliver stock until the following settlement day, and on that day could "carry over" their position to the next by paying a backwardation fee.  This practice was common before 1930, but came to be used less and less, particularly since [[Option (finance)|options]] were reintroduced in 1958.

The fee here did not indicate a near-term shortage of stock the way backwardation means today, it was more like a "lease rate", the cost of borrowing a stock or commodity for a period of time.
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