| Basis of Difference | Forward | Futures |
| Standardised Agreement | Forward Contracts are tailor made agreements wherein terms and conditions are determined by the parties involved in it . | Futures contracts are standardised agreement wherein terms and conditions of the contract are decided by the regulating authority and every party entering into a contract follow the same rules and regulations . |
| Intermediary | In case of forward contract , buyer and seller involved in the agreement directly negotiate with each other . | In case of futures contract , buyer and seller do not know each other and negotiate through an intermediary known as “ Stock Exchange ” . |
| Risk of Default | Due to the absence of an intermediary between buyers / sellers , there is a very high probability of default by any or all the parties involved in the agreement . | Futures contracts are settled through clearing houses that guarantee the successful implementation of the transactions . |
| Advance Payment | Forward contract does not force parties to make advance payment though it should not be a part of terms and conditions of an agreement . | Parties entering in the futures contracts are obliged to deposit pre decided amount ( margin money ) with the regulating authority at the time of entering into a contract . |
| Market Type | Forward Contracts are the part of Over the Counter Market . | Futures Contracts are the part of Centralized Stock Exchange ( s ) such as NSE , BSE . |
| Settlement Mechanism | Cash flow takes place only once i . e . at time of expiration of the contract . | Margin Account ( i . e . advance payment ) is settled on daily basis . |
| Physical Delivery | Forward Contracts are settled by Physical Delivery of an underlying asset. | Futures contracts are usually settled by cash . |
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