Future’s Exchanges

Futures contracts can be based on foreign exchange market arrangements, money market arrangements, bond market arrangements, equity market arrangements, and soft commodities market arrangements. The existence of the derivative markets will provide the price discovery and risk managements. This will ensure the markets for the underlying assets are more efficient and permits trading at low transaction costs. The exchange traded contracts are standardized according to the stipulations in the exchange platforms the trade from. The exchange contract will depict several details corresponding to the transaction, such as the currency it is being dealt in, the trade intended, the minimum tick value and the last trading any and expiry. The exchanges are normally regulated according the governing body in office at the time the futures contracts are drawn. These exchanges will accommodate the actual trading exercise and only the members can be involved in the exercise. These exchanges are also responsible for the futures contracts being kept and terms of the contracts fulfilled accordingly. As such an exchange effectively plays quite a pivotal role in ensuring all transactions adhere to the stipulations within the contract rules which are based on the exchange used. The exchange also has penalties in place to deal with discrepancies and any under handed techniques that are found to be used during transactions. - 10 - The validity of a futures contract depends largely on the understanding of the two parties involved in the transaction. The exchange used will be part of the organizing organ that play the role of a designated representative that acts to guarantee the validity of the contract and will act to enforce it according to the terms stipulated.