Difference between futures and forward

Sunday, 14 March , 2004, 15:26

Some of the basic differences between the futures and forward contracts are as follows:

While futures contracts are traded on the exchange, forwards contracts are traded over- the-counter market.

Incase of futures contracts the exchange specifies the standardized features of the contract, while no pre determined standards are there in the forward contracts.

Exchange provides the mechanism that gives the two parties a guarantee that the contract will be honored whereas there is no surety/guarantee of the trade settlement in case of forward contract.