(1) has different degrees of standardization. The forward contract follows the principle of freedom of contract, and the relevant conditions in the contract, such as the quality, quantity, delivery place and delivery time of the subject matter, are determined according to the needs of both parties; Standardization of futures contracts, futures exchanges have formulated standardized terms for futures contracts of various subject matters, such as quantity, quality, delivery place, delivery time, delivery method and contract size.
(2) The trading places are different. There is no fixed place for forward contracts, and both parties to the transaction look for suitable objects; Futures contracts are traded on exchanges, generally not allowed to be traded over the counter.
(3) The risk of default is different. The performance of the forward contract is only guaranteed by the credibility of both parties. Once one party is unable or unwilling to perform, the other party will suffer losses. The performance of futures contracts is guaranteed by the exchange or clearing company.
(4) The price is determined in different ways. Forward contracts are directly negotiated by both parties and determined privately, which leads to asymmetric information and low pricing efficiency. Futures contracts are determined by public bidding on the exchange, with fully symmetrical information and high pricing efficiency.
(5) Different ways of expression. Most forward contracts are only fulfilled by physical delivery at maturity: most futures contracts are settled by liquidation.
(6) The relationship between the parties to a contract is different. Forward contracts must have a full understanding of the credibility and strength of both parties, while futures contracts can have no understanding of both parties.
(7) Different settlement methods. The forward contract will be settled only when it expires, and it will not be settled during the period; Futures contracts are settled every day, and the floating profit or loss is reflected through the margin account.
Terms of a futures contract