Nature of Financial Futures:
A financial futures contract is an agreement between a buyer and a seller reached today that calls for the delivery of a particular security in exchange for cash at some future date. The market value of futures contract changes daily as the market price of the security to be exchanged moves over time. As a result, futures contracts are " marked to market" each day to reflect the current value of the assets subject to eventual delivery under each futures contract, and a cash payment may have to be made (usually to a broker) by one or other party to the contract in order to protect against possible loss.

Purpose of Financial Futures of Trading:
The financial futures markets are designed to shift the risk of interest rate fluctuations from risk-averse investors, such as commercial banks, to speculators willing to accept and possibly profit from such risks. Futures contracts are traded on organized exchanges (such as Chicago Mercantile Exchange, or London Futures Exchange), where floor brokers execute orders received from the public to buy or sell these contracts at the best prices available. When a bank contacts an exchange broker and offers to sell futures contracts (i.e., that bank wishes to "go short" in futures), this means it is promising to deliver securities of a certain kind and quality to the buyer of those contracts on a stipulated date at a predetermined price. Conversely, a bank may enter the futures market as a buyer of futures contract ( i.e., the bank wishes to " go long " in futures ), agreeing to accept delivery of the particular securities named in each contract or to pay cash to the exchange clearing house the day the contract mature, based on their price at that time.

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