Currency exchange futures - Research Paper Example

F) may be traded in any of the three ways: 1) At an Exchange regulated by the Commodity Futures Trading Commission (CFTC) 2) At an exchange regulated by the Securities Exchange Commission (SEC). 3) Off-Exchange, also known as Over the Counter (OTC) Market. A buyer interacts directly with a seller and there is no exchange or clearing house to support the transaction. CEF being part of Foreign Exchange trading begins Monday morning in Sydney, Australia (Sunday afternoon in the United States) and moves around the globe as business days begin in financial centers from Tokyo to London to New York, ending with the close of trading Friday afternoon in New York.

Anything that happens anywhere in the world at any time of the day or night affects the Forex market immediately without waiting for an exchange to open before the effects can be seen. The Forex market is always open for trading. CEF can be traded electronically and hence positions can be opened and closed in realtime. CEF has the advantage of High leverage, the margins are low and hence small amount of investment can give control of sizeable position. With a minor positive movement would result in higher returns on investment.

The disadvantage being that a minor negative movement would result in erosion of your funds. The most popular currency futures market is the EUR futures market, which is based upon the Euro to US Dollar exchange rate. The most popular currency futures are provided by the CME Group (formerly the Chicago Mercantile Exchange), and include the following futures markets: Currency futures trade Futures Contracts that are worth a specific amount of the underlying currency. For example, the EUR futures contract is worth $125,000.

Date of delivery is also pre-determined like third Wednesday of jan, march, June,etc. The specifications of each contract in the currency futures market states the contract value, minimum price change (tick size) and the price change value (tick value). For Individual