What's the difference between forward and futures?
1 The market is different: futures are on-site financial instruments, while forwards are off-site financial instruments. Futures trading is publicly traded on organized exchanges and subject to legal supervision; Forward is a private contract with less supervision.
The degree of contract standardization is different: the object of futures trading is standardized contract, and the object of forward trading is mainly physical object;
3 Different ways of expression: Only long-term physical delivery can be selected, while futures can be hedged and closed in addition to physical delivery.
4 different credit risks: futures trading adopts daily debt-free settlement system, and the credit risk is very small. It takes a long time from forward trading to final physical delivery, during which various changes will take place in the market, and any behavior that is not conducive to performance may appear, and the credit risk is great.
In addition, there are different performance responsibilities. Futures contracts have hedging mechanism, large performance space, extremely low physical delivery ratio, and the transaction price is limited by the minimum price change unit and daily trading amplitude. If the forward contract is to be cancelled midway, both parties must agree. No unilateral will can terminate the contract, and the proportion of physical delivery is extremely high.