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Forwards vs futures

7 minute read · By Krishna Avadhani, Vestora Academy · Updated 18 October 2026

A forward is a private agreement to buy or sell an asset at a fixed price on a future date. It is customised but carries counterparty risk: the other side may not pay. Currency forwards between companies and banks are the classic example.

A futures contract is a standardised forward traded on an exchange (such as CME, ICE or ASX 24) with a clearing house guaranteeing both sides. Contracts specify the underlying, size, tick value, expiry months and settlement method (physical delivery or cash).

Examples: the ASX SPI 200 futures contract (on the S&P/ASX 200 index), the CME E-mini S&P 500, crude oil, gold, wheat, 3-year and 10-year Australian Treasury bond futures, and the 30-day interbank cash rate futures used to gauge RBA rate expectations.

Key takeaways

  • Forward = private and custom; futures = exchange-traded and standardised.
  • Clearing houses remove most counterparty risk in futures.
  • Cash-rate futures show where markets expect the RBA to move.

Check your understanding

1. Main advantage of futures over forwards?

  • Customised terms
  • Clearing house guarantee and liquidity
  • No margin
  • No expiry
Show the answer

Clearing house guarantee and liquidity. Standardisation and central clearing.

2. Which ASX futures contract is often used to gauge expected RBA cash rate moves?

  • SPI 200
  • 30-day interbank cash rate futures
  • Wool futures
  • Gold futures
Show the answer

30-day interbank cash rate futures. Its prices imply market expectations for the cash rate.

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General education only, not financial advice. Examples are illustrations. Rules, tax settings and products change; check official sources.