Currency Futures

The FOREX market is essentially a cash or spot market in which more than 90 percent of the trades are liquidated within 48 hours. Currency trades held longer than this are sometimes routed through an authorized commodity futures exchange such as the International Monetary Market (IMM). IMM was founded in 1972 and is a division of the CME Group, formerly the Chicago Mercantile Exchange. CME Group specializes in currency futures, interest rate futures, and stock index futures, as well as options on futures. Clearinghouses (the futures exchange) and introducing brokers are subject to more stringent regulations from the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and National Futures Association (NFA) agencies than the FOREX spot market (see for more details).

It should also be noted that FOREX traders are charged only a transaction cost per trade, which is simply the difference between the current bid and ask prices. Currency futures traders are charged a round-turn commission, which varies from broker to broker. Also, margin requirements for futures contracts are usually slightly higher than the requirements for the FOREX spot market.

By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2020. Content published with author's permission.

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