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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives

In an exchange-traded equity futures contract, which feature is standardised by the exchange rather than negotiated between the buyer and the seller?

Lot size and expiry date are standardised by the exchange for futures contracts. The price is found through trading, quantity is chosen by the trader, and the clearing corporation becomes the counterparty, so only contract specifications like lot size and expiry are fixed in advance.

  1. ALot size and expiry date of the contractCorrect
  2. BPrice at which the trade is executed
  3. CNumber of contracts the buyer wishes to hold
  4. DChoice of counterparty for the trade

Explanation

Exchange-traded futures have standardised terms such as lot size, expiry date and tick size. The traded price is discovered in the market and the number of contracts is the trader's choice. The counterparty is replaced by the clearing corporation through novation, so it is not chosen.

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