Futures Contracts vs.OTC Forward Contracts

Futures contracts vs. OTC forward contracts:

trade on exchanges (e.g. the CME) rather than OTC;

only available for fixed contract amounts and fixed settlement dates;

the exchanges demand that a fixed amount of collateral be posted against the futures contract trade; and

this collateral is marked-to-market daily, with counterparties asked to post further collateral if their positions generate losses.

futures provide deep, liquid markets for deferred delivery with a minimum of counterparty (i.e., default) risk.