What Is the Difference between a Futures Contract and a Forward Contract?
Both futures and forwards are agreements to buy or sell an asset at a predetermined price on a future date. The key difference is standardization and exchange-trading.
Futures contracts are standardized, traded on regulated exchanges, and are subject to daily marking-to-market and margin requirements. Forward contracts are customized, traded over-the-counter (OTC), and carry higher counterparty risk because they lack a central clearing mechanism.
Glossar
Forward Contracts
Structure ⎊ Forward contracts, within cryptocurrency and derivatives markets, establish a customized agreement for the future exchange of an asset at a predetermined price and date, differing from standardized futures contracts through their bespoke nature.
Futures Contracts
Mechanism ⎊ Futures contracts, within cryptocurrency and broader financial derivatives, represent standardized agreements obligating parties to transact an asset at a predetermined price on a specified future date; these instruments facilitate price discovery and risk transfer, extending beyond traditional commodities to encompass digital assets and complex financial indices.