A: Both forex futures trading and foreign exchange forward transactions deliver a certain amount of subject matter at an agreed price in the future, but there are also many significant differences between them, which are mainly determined by the operating rules of the futures market. Foreign exchange futures contracts are regarded as standardized foreign exchange forward contracts, which effectively avoid the shortcomings of inflexible delivery date and high default risk. The main differences between the two contracts are:

(1) Whether the transaction contract is standardized. The contract amount and delivery date of foreign exchange forward transactions shall be decided by both parties through consultation. However, the amount, term and delivery date of foreign exchange futures contracts are standardized and unified by futures exchanges. All traders choose to trade on this basis.

(2) Whether to conduct centralized trading and settlement. The forward foreign exchange market is an invisible decentralized market, and customers reach a deal through private contact with telecommunication tools. Futures trading is conducted on a tangible exchange, and all traders conduct centralized and public trading on the exchange floor through member companies. The settlement of foreign exchange forward transactions is completed by both parties through bank transfer. Futures trading shall be settled by independent clearing institutions set up by the futures exchange for buyers and sellers respectively.

(3) Market liquidity. Foreign exchange forward contracts are generally non-transferable or directly hedged, and the proportion of maturity delivery is above 90%. Most futures contracts are settled by hedging before the maturity date.

(4) Price formation mechanism and fluctuation degree. The forward exchange rate used in foreign exchange forward transactions is quoted by foreign exchange banks, and customers with large transactions can also negotiate with banks to determine the delivery exchange rate. The price formation of futures contracts follows the open centralized bidding system and is listed and traded on the exchange. In addition, the futures exchange also stipulates the minimum change and the maximum change limit of the contract value for each foreign exchange futures product.

(5) Performance guarantee. Relatively speaking, the default risk of foreign exchange forward transactions is relatively high, so banks have strict requirements on customers' credit ratings as performance guarantees. The clearing institution of the futures exchange requires the brokerage company on the spot and the brokerage company to require the entrusted trader to open a separate deposit account as a performance guarantee.

(6) speculative. Although the margin system effectively prevents the default risk of forex futures trading, it also stimulates speculative trading due to its high leverage.