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A future is a contract for the future delivery of commodities, shares, securities, foreign currency or other financial instruments. Futures are a variety of forward contract. At its simplest that is an agreement to buy or sell a fixed amount of a commodity or financial instrument at a specified future date and at a pre-agreed price. »Ê¹ÚÌåÓýappy give the holder not just the right but the obligation to buy or sell at the specified price.

Futures come in two forms:

• Exchange-traded futures

Exchange-traded futures are forward contracts made in the standard form required by a futures market or exchange. »Ê¹ÚÌåÓýapp contract is in a standard form as it is the futures themselves that are traded. »Ê¹ÚÌåÓýapp function of the futures exchange is to provide a market in which the contracts can be bought and sold.

It would be unusual for an exchange-traded future to be completed by delivery of the underlying commodity or financial instrument. »Ê¹ÚÌåÓýapp contract will usually be closed out by buying another future with reciprocal obligations.

• Over-the-counter futures

Over-the-counter (‘OTC�) futures are forward contracts, usually created by financial institutions, designed to meet the specific needs of particular people.

»Ê¹ÚÌåÓýappre is no established market in over-the-counter futures. »Ê¹ÚÌåÓýappy will often run to maturity unless they can be settled by making a monetary payment.

Though over-the-counter forward contracts may be referred to as futures, commercially that term is more commonly confined to exchange-traded contracts. »Ê¹ÚÌåÓýapp TCGA refers to both forms of contract as a future.