The use of leverage is practiced in the futures markets due to the existence of _________.
A) banks
B) brokers
C) clearinghouse
D) margin

Question

Quizplus · Accepted Answer

The use of leverage is made possible through the deposit of a margin, which allows traders to control a larger position with less capital. The margin is held by a clearinghouse to ensure that traders fulfill their obligations, but it is the availability of margin that permits leverage to be employed in futures trading. The existence of banks and brokers is peripheral to the operation of leverage in futures markets.

The Use of Leverage Is Practiced in the Futures Markets