How Does Standardization Affect the Liquidity of Futures Contracts? ▴ Learn

How Does Standardization Affect the Liquidity of Futures Contracts?

Standardization ensures that all contracts for a specific asset and maturity date are identical. This uniformity makes it easier for buyers and sellers to find a match quickly, concentrating trading volume.

High trading volume leads to tighter bid-ask spreads and greater liquidity. This ease of entry and exit is a major advantage over customized OTC products.

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