The advantage that standardization of futures contracts brings is that ________ is improved because ________.
A) liquidity; all traders must trade a small set of identical contracts
B) credit risk; all traders understand the risk of the contracts
C) pricing; convergence is more likely to take place with fewer contracts
D) trading cost; trading volume is reduced

Question

Quizplus · Accepted Answer

Standardization of futures contracts improved liquidity because it requires all traders to trade a small set of identical contracts, which means that there are more buyers and sellers for each contract, and traders can enter and exit positions easily. This increased liquidity also means that there is less slippage in prices, which benefits both buyers and sellers.

The Advantage That Standardization of Futures Contracts Brings Is That