Types of commodity exchange - SS1 Commerce Past Questions and Answers - page 1

Immediate exchange of assets

Forward exchange

Standardization and exchange-traded nature

Futures exchange

Right, but not obligation, to buy or sell an asset

A spot exchange involves the immediate exchange of assets or currencies, whereas a forward exchange is an agreement to exchange assets at a predetermined price on a future date. In a spot exchange, the transaction occurs right away, while in a forward exchange, the exchange takes place at a later date.

Futures contracts are standardized and traded on regulated exchanges, whereas forward contracts are customizable and traded over-the-counter. Additionally, futures contracts can be bought or sold on the exchange before the expiration date, while forward contracts are typically held until the agreed-upon future date.