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` Currency future contract is a contract for futuredelivery of a specified currency against another.

` It is an agreement between two parties to exchange

one currency for another, with the actual exchangetaking place at a specified date in the future butwith the exchange rate being fixed at the time theagreement taken into.

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` Organized Exchange.

` Standardization.

` Clearing house.

` Margin.` Marking to market.

` Actual delivery is rare.

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` It is traded on organized exchange either

with a designated physical location where

trading takes place, the trading pit or via

computer screens.

` It provides a ready liquid market in which

futures can be bought and sold at any

times during the trading hours.

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Certain standards has been set

regarding 1) size of contract

2) its maturity

Contracts are traded in whole numbers. For each contract, the exchange specifies a set of

delivery months and specific delivery days within

those months.

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` It acts as an intermediaries.

` It guarantees performance

` It protects the contract till maturity by imposing

margin requirements on traders.

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` In case of future contract every transaction isdone by the exchange member and clearing house,so exchange requires a performance bond in theform of margin deposited by the members who

entered into a futures commitment.

` margin value is generally between 2.5 to 10% ofthe value of the contract.

` It may be in the form of cash or securities like TB,bank letter of credit, etc.

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` It means that at the end of trading session, all

outstanding contracts are re-price of that session.

`

Margins accounts of those who made losses aredebited and those who gained are credited.

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In case of futures actual delivery is rare because

Futures are used as hedging device against price

risk and as a means of physical acquisition of the

currency.

Most of the contracts are extinguished before

maturity

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` Future contracts are traded by a system of openoutcry on the trading floor of a centralized andregulated exchange or through electronic screentrading.

` Floor trader (those who trade for their own a/c)` Floor brokers (those who trade on behalf of others)` Dual traders (those who do both)

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` Delta hedge

` Cross hedge.

` Delta cross hedge.

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` It includes

Intra- currency spread:(exists when aspeculator buys/sales the same currency

for two delivery date) Inter currency spread: (exists when the

deal involves purchase and sale of futurecontracts with the same delivery date butwith two different currencies)