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What Is the Primary Difference in Liquidity between Forward and Futures Contracts?

Futures are highly liquid due to standardization and exchange trading. Forwards are illiquid because they are customized and OTC.
Greeks.Live03.11.25

What Is the Primary Difference in Liquidity between Forward and Futures Contracts?

Futures contracts are highly liquid because they are standardized and traded on centralized exchanges. The exchange environment provides transparency and a high volume of participants, making it easy to enter or exit a position quickly.

Forward contracts, being customized and OTC, are generally illiquid. Finding a counterparty to offset a forward contract can be difficult.

The unique terms make the contract non-transferable.

What Are the Main Differences between a Forward Contract and a Futures Contract?
Are Forward Contracts Subject to the Same Regulations as Futures Contracts?
What Is the Primary Difference between a Forward and a Futures Contract?
What Is Counterparty Risk and Why Is It Higher in Forward Contracts?

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