Forwards have credit risk, but futures do not because a clearing house guarantees against default risk by taking both sides of the trade and marking to market their positions every night. Forwards are basically unregulated, while futures contracts are regulated at the central government level. Futures trade on an exchange such as the Chicago Mercantile Exchange, and a clearing house acts as an intermediary between buyers and sellers to guarantee the fulfillment of the contract at its expiration date. The contracts may not settle for weeks or months down the road, but the margin must be posted and maintained to ensure the integrity of the market. Futures contracts are bought and sold on a wide range of commodities, currencies, interest rates and indexes, and they are a huge part of the financial industry.
College Football Futures
- For farmers, they secure income regardless of crop value fluctuations.
- Underlying assets include physical commodities or other financial instruments.
- Speculators can use futures contracts to bet on the future price of some asset or security.
- Their centralised marketplaces and transparency allow valuable price information to emerge through bidding and asking activity.
- Adopting the canonist position, all contracts were said to be an exchange of promises that were consensual and bonae fidei, that is, based simply on mutual assent and good faith.
A trader holds a stock futures contract until expiration, they have two choices – settle in cash at market price like index futures, or exercise the contract to receive/deliver actual shares. SEBI also regulates participatory notes and foreign institutional investors (FIIs) involved in derivatives trading. It works to detect cases of insider trading and prohibit other unfair trade practices in the futures market. By regulating futures contracts, SEBI aims to protect investors, maintain orderly markets, and prevent excessive speculation. Its oversight is essential for building confidence in the fairness and integrity of India’s stock futures market. SEBI is responsible for protecting the interests of investors, promoting the development of the securities market, and regulating the securities market.