An introduction to futures exchanges by gcneophil9



A futures exchange is a platform for trading a number of futures contracts involving commodity
or financial instruments. The contract is binding at the time the agreement between the buyer
and seller.

And there is no secondary market for trading in futures contracts. All contracts are primary
contracts and every contract opened must be registered with the local stock exchange

Futures trading contracts are not issued as the issuance of stock but established when there is
a buyer (long) and there is the seller (short) The buyer and seller of the contract creates a new
contract each time they reach an agreement. If it were not for closing the previous long position,
the sellers will be short.

Short and long are always in pairs, where there are parties who have a long position, there must
be a short party. On futures exchanges, the buyer and seller contract creates a new contract
each time they reach an agreement.

In the futures market, investors may realize losses or profits, either during buying or selling time,
or when the purchase or sale transaction has closed position. Neither buyers nor sellers may
not realize losses or gains on the purchase or sale, if the position continues to be open. While in
the capital market, sellers should not be short.

Investors in the stock market will only realize losses or profits on selling shares owned. The
possibility of profit only applies to the seller, while buyers will only make losses or profits at the
time of sale.

Trading on capital markets is conducted in a manner in which the sale and purchase of shares
is carried out physically. Whereas in futures trading a contract or agreement involves the
delivery of an asset in the future.

A seller or buyer in the futures market are required to submit funds of about 10-50% the value of
commodities traded as a sign of good faith. Although the practice of futures trading has been
going on for a very long time, the history of modern futures trading began in the early 18th
century in Chicago.

The margin collected by brokers trading futures as collateral for open contracts should be
greater than the initial margin deposited by the clearing members on the clearing house.

The contracts traded on futures exchanges are generally standardized, and their variables are
extensive. Liquidity remains high due to the limited quantity of standardized contracts.

To top