What are futures markets?

Futures markets are also called futures exchanges. Traders use futures exchanges to hedge against price volatility and speculate on the future prices of stock indexes, currencies, commodities, interest rates and other assets. A futures contract is a contract to exchange a particular security at a specific price on a specific future date.

What is a futures contract?

Futures contracts are made in an attempt by producers and suppliers of commodities to avoid market volatility. These producers and suppliers negotiate contracts with an investor who agrees to take on both the risk and reward of a volatile market.

How does a futures exchange work?

Futures exchanges establish standardized contracts for trading on their trading venues, and they usually specify the following: assets to be delivered in the contract, delivery arrangements, delivery months, pricing formula for daily and final settlement, contract size, and price position and limits.

What is a non-profit futures exchange?

Futures exchanges can be integrated under the same brand name or organization with other types of exchanges, such as stock markets, options markets, and bond markets. Non-profit member-owned futures exchanges benefit their members, who earn commissions and revenue acting as brokers or market makers.