There are many similarities between futures trading and forward trading, the most prominent of which is that buyers and sellers agree to buy and sell a certain number of goods at an agreed price at a certain time in the future. Forward trading is the embryonic form of futures trading, and futures trading is developed on the basis of forward trading.
2. The difference between futures trading and forward trading.
(1) The transaction objects are different. The object of futures trading is the standardized futures contract formulated by the exchange. It can be said that futures is not a "commodity", but a contract, a standardized contract that can be repeatedly traded, and does not involve specific physical objects in futures trading. The object of forward trading is a non-standardized contract reached by both parties through private consultation, and there is no restriction on the goods involved. The forward contract transaction represents the wishes of both parties, and the two parties reach an agreement on the trading conditions through one-on-one negotiation and sign the forward contract.
(2) Different functions. The function of futures trading is to avoid risks and price discovery. Futures trading is that many buyers and sellers buy and sell futures contracts through open, fair, just and centralized bidding according to the rules of futures market, which is easy to form real and authoritative futures prices, guide the production and business activities of enterprises, and provide hedgers with opportunities to avoid and transfer the risk of price fluctuations. Although forward trading can also regulate the relationship between supply and demand and reduce price fluctuation to a certain extent, its price authority and risk diversification ability are greatly reduced due to the lack of liquidity of forward contracts.
(3) Different ways of expression. There are two ways to execute futures trading: physical delivery and hedging liquidation, in which most futures contracts are closed by hedging liquidation. The performance of forward trading mainly adopts physical delivery, although endorsement transfer can also be adopted, but the final performance is physical delivery.
(4) Different credit risks. In futures trading, based on the margin system, the daily debt-free settlement system is implemented, and the settlement is carried out every day, so the credit risk is small. It takes a long time for forward transactions to complete physical delivery. During this period, various changes will take place in the market, and there may be various behaviors that are not conducive to performance, such as: the buyer has insufficient funds and cannot pay on time; The seller's output is insufficient to guarantee the supply; The market price rises, and the seller is unwilling to deliver the goods at the original price; The market price tends to fall, and the buyer is unwilling to pay at the original price. All these will make the forward transaction unable to be finally completed, and the forward contract is not easy to transfer, so the forward transaction has high credit risk.
(5) The deposit system is different. There is a specific margin system for futures trading, and the margin is charged to the buyer and the seller according to a certain proportion of the contract value, usually 5% ~ 10% of the contract value. Whether to charge or how much margin to charge for forward transactions is decided by both parties.