An organized futures exchange standardizes nonstandard forward contracts,
establishing such features as contract size,delivery dates,and condition of items that can be delivered.Only the price and number of contracts are left for futures traders to negotiate.

Question

Quizplus · Accepted Answer

This statement is true. Standardization of nonstandard forward contracts is one of the key functions of a futures exchange, which helps provide greater liquidity and transparency to the market. The exchange sets the parameters for the contract, such as the delivery date, quantity, quality, and location of the underlying asset, leaving only the price and quantity to be negotiated by traders.

An Organized Futures Exchange Standardizes Nonstandard Forward Contracts