Futures industry

From MarketsWiki
Jump to: navigation, search
3pt logo.gif

The futures industry is a general term used to describe the participants and products related to the trading of commodity futures around the world. Participants include:

  • Speculative traders who buy and sell various futures instruments for their own risk and benefit;
  • Institutional speculative traders, typically designated by the National Futures Association as Commodity Trading Advisors and Commodity Pool Operators, who take market positions on behalf of other investors;
  • Companies and traders with a commercial interest in a commodity (either as a producer or purchaser of the commodity) who trade to hedge their risk related to that commodity;
  • Brokers, defined by the National Futures Association as Introducing Brokers and Futures Commission Merchants, who solicit and facilitate the trading of others, and profit through that activity;
  • Exchanges, which provide facilities and definitions for regulated, open and standardized trading of futures instruments;
  • Advocacy groups and organizations, which serve to consolidate and amplify the opinions and interests of other industry participants;
  • Regulatory agencies that oversee and ensure ethical and legal compliance of other participants.

Products include:

  • Standardized commodity futures contracts traded at exchanges and options on many of those futures contracts;
  • Physical commodities traded in cash markets. The term "physical" applies both to tangible products like beef and corn, and also to more intangible commodities such as interest rates, currency exchange rates, and changes in the weather.

The futures industry's boundaries are somewhat gray at times. Though not strictly a part of commodity futures, participants and products related to the currency foreign exchange markets (FOREX) are often placed within the realm of the futures industry.