(2) The degree of standardization is different. Forward contracts have great flexibility, which also brings great trouble to the transfer and circulation of contracts, resulting in the underdeveloped secondary market of forward contracts. Futures contracts are standardized, which makes it difficult for futures to meet special trading needs, but it also greatly facilitates the conclusion and transfer of futures contracts and has strong liquidity.
(3) The risk of default is different. The performance of the forward contract mainly depends on the credit of both parties. The performance of futures contracts is guaranteed by the exchange or clearing company. The two sides directly face the exchange, and the default risk is almost zero.
(4) The relationship between the parties to a contract is different. Forward contracts are signed directly by both parties to the transaction, and it is usually necessary to fully understand the reputation and strength of the opponent. In futures trading, traders simply don't need to know who the other party is, so the market information cost is very low.
(5) The price is determined in different ways. The delivery price of a forward contract is directly negotiated and privately determined by both parties to the transaction. The futures trading price is determined by public bidding or according to the quotation of market makers.
(6) Different settlement methods. After the signing of the forward contract, the settlement will be made when it expires, and no settlement will be made during this period. Futures trading is settled every day.
(7) Different settlement methods. Most forward contracts can only be terminated by physical delivery or cash settlement at maturity. There are three ways to settle futures contracts: due delivery settlement, liquidation and futures conversion to spot. In fact, most futures contracts are completed by closing positions.