Fundamentals Of Futures Markets
Futures markets can be characterized as a continuous auction, in which, in the process of competitive bidding, the process of pricing the assets of various commodities and financial instruments – agricultural products, metals, oil and petroleum products, foreign currencies, bonds, stock indexes, etc. Trafficking occurs in futures contracts and options on futures contracts. Contemporary futures markets are characterized by rapid growth, diversification and constant innovation. Extensions and changes of futures contracts, improvements in the institutional and regulatory structure of the industry, as well as the use of latest technology make futures markets more attractive for investors and cause a very rapid development of this economic sector. With many billion annual volume of futures trading, the number of transactions increased by 30% in 2003 year. The total dollar turnover of futures contracts traded to date in the U.S., several times the dollar turnover of shares on all stock exchanges in the United States. High liquidity reliability and ease of trade, greater leverage, diversification and the opportunity to create a huge amount of investment systems and strategies are the distinguishing characteristics of futures markets and possible reasons for their popularity. Futures contracts are standardized and traded on stock exchanges in a centralized manner and under strict regulatory oversight. The organizational system of futures markets in which clearing organizations act as a comparison of each purchase and sale, on the principle of "buyer to every seller and seller to every buyer, increases liquidity and provides a mechanism to ensure payment of all profits and collect all the damages on a daily basis.