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  • 8.2.2-FUTURES MARKETS-TRADING OF FUTURES

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  • Trading of futures

     
     

    Traditionally the trading of futures contracts on the exchange floor was  permitted only between exchange members. However, with the advent of electronic trading, anyone with the appropriate trading rights agreement with a clearing firm, direct or through brokers, can now trade futures electronically.

    Purchases and sales positions for the same contract month offset each other and are built up on a daily basis. Rather than carry such trades until maturity, the clearing house matches offsetting positions and clears them from the records of the brokers who handled them. The clearing house takes the place of the buyer or seller: it performs the role of seller to all buyers, and that of buyer to all sellers. In this way a maximum number of direct settlements is automatically possible at the close of each trading day.

    In London all transactions take place in an electronic setting where trades are entered and completed in a screen-based environment. In New York, arabica transactions take place both in 'rings' or 'pits' on a trading floor where authorized floor brokers gather during market hours to trade contracts through 'open outcry', as well as electronically as in London.

    New York robusta trading is entirely electronic.