What is a futures market?
A futures market is an exchange where investors can buy and sell standardised futures contracts and commodities. These are financial products are bought or sold at an agreed price at time of the deal but delivered and paid for at a future date.
Where have you heard about futures markets?
The Tokyo Stock Exchange, New York Mercantile Exchange and London Metal Exchange are all examples of futures markets from around the world.
What you need to know about futures markets.
Futures markets are regulated to ensure fair trading. For example, futures markets in the US, are overseen by the Commodity Futures Trading Commission (CFTC).
Standardised futures contracts ensure that the market is a level playing field and that every trader understands how pricing works. This helps maintain stability in the market.
Payments between buyer and seller are managed by clearing members, who also help to maintain stability. Clearing members are typically banks and financial service firms chosen by the futures market regulator. These absorb the risk that an investor will be unable to go through with the trade by obtaining capital as a precaution.