STOCK FUTURES

Futures exchange was the place / facility for a number of contracts traded memperjual commodity or financial instrument at a specified price which the goods delivery will be made at the time agreed to come. The contract is binding at the time the agreement between the buyer and seller. There is no secondary market for trading in futures contracts. All contracts are the primary contract and every contract (with the subject of a particular contract) incurred (opened) must be registered on the local stock exchange authorities, so the contract was created in the stock.

The history of futures exchanges
Although the practice of futures trading has been going on since the days of yore at the time of the ancient Greeks or Phoenicians, but the history of modern futures trading began in the early 18th century America in Chicago. Chicago is located near the lake Great Lakes, is a center of transportation, distribution and trading of agricultural products because of the location adjacent to the center of Chicago's agriculture and animal husbandry from the western U.S. Midwest

An abundance of crops and lack of supply continues to cause price fluctuations in the market. This has encouraged the formation of a market that allows traders commodity grain (grain), the users of raw materials (such as factories, etc.), companies engaged in agro-business (eg for export) to conduct a transaction "future" or "payment in front of" or known by the term delivery contracts (forward contracts) to protect them against the risk of adverse price change and enable the hedging (hedge). This transfer contract which soon grows into futures contracts (futures contract)

At the time the contract was still a very simple transfer. However, many contracts are not adhered to hand over either by the buyer or the seller. For example, if a buyer contracts to deliver corn has pledged to buy corn at a time agreed upon in the future but at the time of delivery arrived corn price was lower than the contract price then the buyer denies handing over the contract, and vice versa. Transfer contract market is very illiquid and needed an exchange (where possible of the transaction between the counterparty does not need to know the opponent) to facilitate transactions between buyers or sellers of a commodity.

In 1848, the Chicago Board of Trade (CBOT), established a first futures exchange in the world. Trade is still in the form of contract delivery and on March 13, 1851 made the first delivery contract for commodity corn. In the year 1865 introduced the standardization of contract delivery.

Chicago Produce Exchange was established in 1874, later in the year 1898 was renamed the Chicago Mercantile Exchange (CME). In 1972 formed a division of the CME which is named "the International Monetary Market" (International Monetary Market-IMM), with the aim to offer a contract in the form of transfer of foreign currency that is: pounds sterling, Canadian dollar, German mark, Japanese yen, Mexican pesos , and Swiss franc.

In the year 1881 in the Midwestern United States, a regional market that is established in the city of Minneapolis, Minnesota and in 1883 diperkenalkanlah futures trading for the first time and since then continuously trade today and the Minneapolis Grain Exchange (MGEX) is a the only option and futures market for hard red spring wheat types.

Later in the 1970s developed the financial futures contracts which can be traded value of future interest rates. In Eurodollar contract introduced in 1981 (in particular Eurodollar futures contract 90 days) which has a major influence on the development of interest rate swap market.

New York Mercantile Exchange (NYMEX) is the trading of commodity futures exchanges and major physical trading forum for energy and metals products, with the amount of daily trading transactions in May 2007 reached 1,754,442, or 143,864,215 transactions annually.

In 2006, the New York Stock Exchange together with the London Exchanges "Euronext" carry trade futures electronically to form a trading stock futures and options of the first transcontinental.

Differences in futures and stock markets
Futures trading contracts are not issued as the issuance of stock but "formed" when there is the buyer (called the long term) and there is the buyer (called a short) The buyer and seller of the contract creates a new contract each time they reach an agreement. If it were not for closing the previous long position, would the sellers will be short. Short and long are always in pairs, where there are parties who have a long position, there must be a short party. in the stock market, a limited number of securities terdaftaradalah. The seller, unless the issuer, the stock can not create it, because the seller must have a capital market or borrow securities before allowed to sell it. While on futures exchanges, the buyer and seller contract creates a new contract each time they reach an agreement. If it were not for closing the previous long position, would the sellers will be short. Short and long are always in pairs, where there are parties who have a long position, there must be a short party.

In the futures market, investors may realize losses or profits, whether buying or selling time, when the purchase or sale transaction was closed position. Neither buyers nor sellers may not realize the loss or gain on the purchase or sale if it continues to open position. While in the capital market, sellers should not be short. Investors in the stock market will only be possible to realize losses or profits on selling time shares owned. The possibility of profit there is only the seller, while buyers will only realize losses or profits at the time of sale.

Capital market that happens is the physical trade in which the sale and purchase of shares carried out physically, so there is physically handed over shares worth of liability to pay 100% of the transaction, while the traded futures trading is a contract / promise or agreement to deliver or receive an item certain in the future. As a seller or buyer in the futures market are required to submit a number of funds is only about 50-10% of the value of commodities that were traded as a good faith (good faith) called the margin.

Derivatives Clearing
On each contract listed and is an open contract, the Clearing will calculate profits and losses on these contracts based on the settlement price set by the Exchange.

Usually there is a body responsible for ensuring completion mengkliringkan and futures contracts / derivatives / Spot and contract delivery regularly, fairly and efficiently so as to maintain market integrity.

When the stock exchange and derivatives such as CBOE LIFEE responsible for providing a means to create efficiency, transparency and orderliness, the completion of the transactions carried out by the Clearing Corporation (clearing firms) or commonly called the Clearing Houses.

Another example in Indonesia, P.T. Jakarta Futures Exchange as the steering and charge exchange futures trading, but the clearing and settlement of transactions conducted by the Indonesian Derivatives Clearing House

Settlement of transactions
On futures transactions to be done, there are four ways that are usually carried out to settle a transaction is being done to close the position, namely:

1. Settlement of transactions in a liquidation.
2. Settlement of transactions in a physical exchange deposits.
3. Settlement of transactions in derivative assets of physical delivery.
4. Settlement of transactions in cash.

Guarantor futures transactions
Derivative contract is a contract that has a level of price volatility is very high, sometimes more volatile than the benchmark asset (underlying asset) and this can make one party suffered huge losses that can not complete the transaction. At a safe trading conditions which the parties engaged in transactions requiring a certainty that the counter would meet its obligations in market conditions which, however, without exception. This requirement can make a complicated arrangement in procedures such as taksasi credit transactions, establishing transaction limits, and other settings for each principal transaction, and this will make the futures trading loses its appeal.

To avoid the mentioned above, the clearing institution shall perform the function of a novation or substitution for the transaction of futures / derivatives that are registered by the clearing member buyer and seller, where the clearing house would ensure the rights and obligations for each member lliring buyers and sellers will guarantee the rights and obligations of the seller to every clearing member buyer.

Clearing agencies in carrying out its function as guarantor institutions and risk management implemented a number of ways in managing the risks it faces, namely:

• Guidance and supervision of the financial condition of clearing members.
• Harvesting and management of margins
• Daily price adjustments
• Separation of funds clearing members in a separate account.
• The clearing fund.
• Reduction of default.

Margin on futures transactions
Margins levied by the clearing house
Clearing agencies in carrying out its role as the implementing agency and the pledging of the clearing member futures transactions will be wearing two kinds of margins, namely:

Initial margin or commonly called the initial margin or margin deposit is also a special fund reserved for the closing

losses which may arise because of margin trading during the expiration of margin trading.

Margin Mark-To-Market Where at the end of each trading day clearing agency will reassess each existing open positions with adjusting to the price of settlement that occurred at the end of the trading day (the "mark to market"), and as a result of the assessment process anniversary, there will arise the advantages and disadvantages, called variation margin margin and clearing institution will automatically debit the account of clearing members experience a lack of margin accounts and crediting the clearing members who have excess margin.

The margin collected by brokers trading futures
The margin collected by brokers trading futures is called "margin customers" is a fund that is on a broker as collateral for open contracts where funding / guarantees should be greater than the initial margin deposited by the broker clearing members on the clearing house.

Institutions that regulate futures trading
Futures trading is governed by an institution which is a stand-alone institutions (independent) and usually referred to as "self-regulatory organizations" or SRO. Regulator which regulates futures trading futures trading in several countries, among others:

In Australia, this role is undertaken by the Australian Securities and Investments Commission (ASIC)

In China by the China Securities Regulatory Commission (CSRC)

In Hong Kong, by the Securities and Futures Commission (SFC)

In India, by the Securities and Exchange Board of India (SEBI)

In Singapore by the Monetary Authority of Singapore (MAS)

In the UK, by the Financial Services Authority (FSA)

In America, by the Commodity Futures Trading Commission (CFTC)

In Indonesia, by the Commodity Futures Trading Supervisory Agency (BAPPEBTI).

In France, the French Commission des Operations de Bourse (COB)

In Germany, by Bundesaufsichtsamt Fur der Wertpapierhandel (bawe)

In Ireland, by the Central Bank of Ireland (CBI)

In Italy, by the Commissione Nazionale per le Societa e He Borsa (CONSOB)

In the Netherlands, by the Securities Board of the Netherlands (STE)

In Quebec, the Commission des Valeurs Mobilieres du Quebec (CVMQ)

In South Africa, by the Financial Services Board of South Africa (FSB)

In Spain, by Comision Nacional del Mercado de Valores (CNMV).

In Malaysia, the Commodities Trading Commission to trade commodity futures and by the Securities Commission to trade in currency futures.