A futures transaction is an exchange-traded contract. A forward contract occurs between private parties. The following table illustrates the differences between forwards and futures:
|
Forwards |
Futures |
|
Private contracts |
Exchange-traded contracts |
|
Unique contracts |
Structured contracts |
|
Default Risk |
Guaranteed by clearinghouse |
|
No up front cash |
Margin Account |
|
Low/no regulation |
Regulated |
