Futures Market
An exchange where standardized contracts for future delivery of commodities or financial instruments are traded.
What is Futures Market?
A futures market is a centralized, regulated exchange where standardized contracts for the future delivery of commodities, currencies, stock indexes, or financial instruments are bought and sold. Futures markets serve two primary functions: price discovery, where buyers and sellers incorporate all available information into prices, and risk transfer, where hedgers offset exposure while speculators provide liquidity. Positions are marked to market daily through a margin system.
Example
The Chicago Mercantile Exchange (CME) hosts one of the world's largest futures markets, offering contracts on crude oil, natural gas, gold, wheat, S&P 500 futures, and Treasury bonds. Daily volume exceeds $1 trillion notional, making it a vital venue for global price discovery and hedging.