Read This Before Any Futures Exchanges

It may be understood that, in futures trading, a buyer and seller of the agreement are necessary for this financial instrument to go into effect. Just the same, it may not be apparent as to the avenue through which a transaction like this occurs.

As the term "futures trading" implies, there is a market for these commodities-based contracts, or rather, several markets. Such an entity that provides for commerce in futures is known simply as a futures exchange and behaves much like other financial exchanges in the United States and abroad, although with its own peculiarities. Some notes about what to look for in a futures exchange and where the most prominent ones may be found:

Futures trading is based on speculation about the future value of certain classes of goods and other securities. By proxy, it is a futures exchange which sets the values of futures.

It should be noted that futures trading is very risky. This owes to the nature of leverage. In the futures exchange game, an initial deposit made to secure the rights to futures is only a fraction of the total worth of the underlying asset. In the event the commodity grows in value, the holder may well reap the rewards. That said, if that same commodity plummets in value or even the rate of the contract itself worsens according to a futures index, this could mean significant losses for the holder. Futures trading, in short, is a gamble.

For those individuals who are serious about trying their luck at a futures exchange, there are some prominent names of which to be aware. One of the biggest exchanges in the United States is a conglomerate of previously separated markets now known as the CME Group, based in Chicago (and named after its chief component, the Chicago Mercantile Exchange). Other notable futures exchanges in America are more specialized in their application, such as the Minneapolis Grain Exchange and the Chicago Climate Exchange.

In addition, foreign nations are also highly invested in futures trading. Some major players on this front are the International Securities Exchange and, by sheer volume of trade, the National Stock Exchange of India.

NEXT: Read This to Understand Futures