The biggest advantage of foreign exchange futures is that their transactions are completed through an exchange. This market is extremely liquid and well managed. Since every transaction acts as the counterparty, the Chicago Mercantile Exchange eliminates the risk of credit default through this single counterparty. Information about prices and transactions is easy to get, and you can also see the top 5 buying and selling prices on the electronic platform.
What are the characteristics of foreign exchange futures? What does foreign exchange futures mean?
Many people who do foreign exchange futures do not know much about foreign exchange futures. The following author tells you what are the characteristics of foreign exchange futures.
Foreign exchange futures are a form of foreign exchange transactions that stipulate the purchase or sale of a specified amount of foreign currency in a specified month in the future. The content of a foreign exchange futures contract generally includes the transaction currency, trading unit, delivery month, delivery date, delivery location, quotation, price volatility, amount of initial margin, etc. The currencies traded in the foreign exchange futures market are generally freely convertible currencies internationally. At present, there are only three futures exchanges in the world that provide standard foreign exchange futures contracts, namely the International Monetary Market (IMM) attached to the Chicago Mercantile Exchange (CME), the Singapore International Currency Exchange (SIM-EX) and the London International Financial Futures Exchange (LIFFE). Among them, IMM's futures trading accounts for more than 99% of the world's trading volume.
Generally speaking, foreign exchange futures contracts refer to IMM's foreign exchange futures contracts. The Mid America Commodity Exchange (Mid America Commodity Exchange), The Financial of the New York cotton Exchange (FINEX) and SIMEX all provide currency futures trading. Foreign currency futures are now mainly used as a tool for foreign exchange hedging, as well as an important foreign exchange speculative trading tool.
Foreign exchange futures contracts are standard contracts. But the contract size (transaction unit) of different currencies is different.
The delivery month is the term of the futures contract stipulated by the foreign exchange futures contract. Generally, 3 months, 6 months, 9 months, and 12 months are the longest contract terms, because most of the contracts have been hedged before expiration. , So the actual delivery of the contract at the expiration date only accounts for a small part. In addition to stipulating the delivery month, it also stipulates the delivery date, that is, a certain day in the delivery month.
In terms of quotation, the quotations of currencies such as Australian dollar, German mark, French franc, Japanese yen and so on are expressed in foreign currencies per US dollar, which is completely consistent with the quotation of typical bank foreign exchange transactions. The British pound and Canada are expressed in US dollars per unit of foreign currency, which is one of the characteristics of international foreign exchange futures contracts.
The foreign exchange futures contract stipulates the minimum volatility. The minimum price volatility is the lowest limit at which the contract price changes due to the relationship between supply and demand when foreign exchange futures are bought and sold in the contract. For example, the minimum price volatility of the British pound futures contract is 5 basis points per 1 pound of the U.S. dollar exchange rate, and the dollar value of each contract is 12.5 U.S. dollars; the minimum price volatility of the Canadian dollar futures contract is 1 basis point per 1 Canadian dollar of the U.S. dollar exchange rate. , The dollar value of each contract is $10 and so on.
Foreign exchange futures contracts stipulate price limits. The ups and downs limit refers to the maximum limit on daily trading changes. The maximum range of daily changes in various foreign exchange futures contracts is also different. For example, the price limit of the British pound futures contract is 500 basis points per 1 pound of the US dollar exchange rate, the US dollar value of each contract is US$1250, and the US dollar value of the Dutch guilder futures contract is US$1250.
After reading the author's introduction, do you know what are the characteristics of foreign exchange futures? Learn these knowledge carefully, as long as you are proficient, you will surely succeed in foreign exchange speculation.