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What is the difference between financial futures contracts and financial forward contracts?
The similarity between futures trading and forward contract trading is that both of them are contracts in which buyers and sellers agree to buy and sell a certain number of commodities at an agreed price in a certain period in the future. But there are great differences between them, mainly as follows:

(1) Futures trading is a standardized contract transaction, the number of transactions and the delivery period are standardized, and there are no sporadic transactions, while the number of forward contract transactions and the delivery period are determined by both parties.

(2) Futures trading is conducted openly in the exchange, so that we can keep abreast of market changes; However, there is no open and centralized trading market for forward contract transactions, and price information is not easy to obtain.

(3) Futures trading has a specific margin system. Margin is not only the financial guarantee of futures trading performance, but also an important means for futures exchanges to control futures trading risks. For forward contract transactions, both parties shall decide whether to collect the deposit.

(4) Futures trading is settled by the clearing house of the exchange or the clearing house, and both parties have only price risk and no credit risk; There are both price risk and credit risk in forward contracts.

(5) Futures trading focuses on the transfer of price risk, and the purpose of forward trading focuses on the transfer of commodity ownership.

(6) Futures trading contracts can change hands many times before the commodity delivery date, allowing both parties to cancel the obligations and responsibilities of the original contract through reverse trading before the commodity delivery, so that buyers and sellers can avoid the price risk through the futures market, while forward trading contracts are difficult to change hands directly before the expiration. No matter what happens to the production and operation, the expired contract should be delivered according to the regulations.