Forward foreign exchange and futures foreign exchange are stupid and confused? Don't make mistakes in investing. In recent years, many financial investors have become more interested in foreign exchange, and they have begun to participate in foreign exchange investments. However, there are still many novices who don't know much about the foreign exchange market.
In recent years, many financial investors are more interested in foreign exchange, and they have begun to participate in foreign exchange investment. However, there are still many novices who don't know much about the foreign exchange market. There are many products in foreign exchange. Today, I will tell you the difference between forwarding foreign exchange and futures foreign exchange.
Let us first look at the definition of both. Forward foreign exchange transactions: Forward foreign exchange transactions mean that both parties do not settle immediately after the trade but pre-arrange the currency, amount, exchange rate, delivery time, and other transaction conditions, and the actual settlement can only be done when the transaction expires. Forward contracts emerged in the 1980s as a hedging tool. Foreign exchange futures trading futures first appeared in Europe. The beginning of futures trading was the development of spot trading. Futures foreign exchange trading refers to a foreign exchange delivery method in which buyers and sellers conduct transactions through public bidding, and the buyers and sellers perform delivery at the agreed exchange rate within the expiry date specified in the contract. Futures trading is a contract signed by the buyer and seller with the agreed quantity, price, and delivery date.
Are foreign exchange forwards and foreign exchange futures still stupidly indistinguishable? From the above definition, we can see that they are delivered on an agreed date at an agreed exchange rate. What is the difference between them? Delivery method: Although the two delivery methods are similar in definition, in most cases, only a few foreign exchange futures contracts will be delivered on the expiry date, and most futures contracts will be hedged before the expiry date. Settlement by hedging and most forward foreign exchange transactions will be realized through actual delivery on the agreed delivery day. Delivery date: The transaction amount and delivery date of forwarding foreign exchange transactions are determined by both parties through free negotiation. Foreign exchange futures trading has standardized and unified regulations on the matters mentioned above. The foreign exchange futures contract stipulates that the contract's expiration date is Wednesday of the third week of the delivery month (different types of delivery months are entirely different, and the delivery months for foreign currency futures are generally March, June, and September). And every December). Transaction form: Foreign exchange futures trading is conducted in the futures trading by public outcry, and the forward foreign exchange market is driven through telecommunication. The transaction price is quoted at the same time. In foreign exchange futures transactions, the parties do not communicate with each other, but the parties use the clearinghouse clearing intermediary to bear credit risk.
Let's take a look at the trading tools of both, namely themes. Foreign exchange futures exchanges deal with foreign exchange futures contracts, while forward foreign exchange markets with forwarding foreign exchange contracts. The specific difference is that foreign exchange futures contracts are standard contracts, which represent the transaction amount. The amount of each contract will have different regulations according to the type of currency. However, the money is limited to a few major currencies; the delivery of forwarding foreign exchange contracts has no fixed regulations on trading instruments. Both parties mutually agree upon the detailed rules of the contract, and there are no particular restrictions on transaction time, place, price, and market disclosure.
Floor brokers and floor traders carry out foreign exchange futures trading in a highly standardized futures exchange managed by the government, with strict trading rules and procedures; in contrast, forward foreign exchange transactions are carried out over the counter, usually not fixed Trading places. Trading Participants: In the foreign exchange futures market, as long as any investor deposits a margin by the regulations, he can trade foreign exchange futures through a foreign exchange broker and clear the members of the futures exchange, thereby developing foreign exchange to exchange futures trading to be flexible and efficient In the market; in the forward foreign exchange market, there are no restrictions on the qualifications of traders, but most of the participants are professional securities dealers or large manufacturers with good relationships with banks. Individual investors and small and medium-sized enterprises who have not obtained credit lines from banks have little opportunity to participate.
Foreign exchange futures trading adopts a margin system. Every day's transactions should be settled through the clearinghouse. Surpluses can be used to withdraw additional cash, while losses need to make up for the margin. No margin is required for forwarding foreign exchange transactions. Both parties to the trade only settle when they expire. Contract transfer: foreign exchange futures contracts can be transferred, and forward foreign exchange contracts cannot be transferred, so liquidity is weak.