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Appendix

Key players

  • ORG Exchange, the physical or electronic marketplace where contracts are bought or sold. Sets rules and the specifications (what, how much, when)
  • ORG Clearing house acts as a middleman to every trade. Becomes a buyer to every seller, and a seller to every buyer. Main job: eliminate counterparty risk (default risk), done through margin (market-to-market) system.
  • INDV Clearing house members, ensure that no default happens. If it does, they are on the hook to cover for the losses. They settle their own trades and their clients. Also, they are the ones to make the margin calls to their clients. They are a buffer between end-traders and the clearing house
  • INDV Hedgers, they use futures to reduce risk. Protect themselves from unfavorable price movements.
  • INDV Speculators, they use futures to profit from risk. They provide the liquidity for hedgers to enter and exit positions easily.