What Mechanisms Are Used to Trade Forward Contracts If They Are Not on an Exchange? ▴ Learn

What Mechanisms Are Used to Trade Forward Contracts If They Are Not on an Exchange?

Forward contracts are traded Over-The-Counter (OTC), meaning they are negotiated directly between two parties, often with a financial intermediary like an investment bank. The mechanism is a bilateral negotiation of all terms: price, amount, and settlement date.

Once agreed, the contract is a private, legal obligation. There is no central matching engine or public order book for forwards.

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