A futures contract is to a forward contract as payment in currency is to payment by check. An organized market facilitates trade among strangers. Such a market trades a standardized contract under appropriate rules. The equilibrium distribution of market clearing prices is asymptotically normal with a standard deviation that varies inversely with the volume of trade, given underlying supply and demand conditions. Empirical relations giving the commission and margin per contract as a function of the volume of trade and outstanding commitments for 23 commodities support the theory. Also, comparisons of pertinent aspects of 51 commodities divided into active, less active, and dormant groups are consistent with the theory.

A futures contract is to a forward contract as payment in currency is to payment by check. An organized market facilitates trade among strangers. Such a market trades a standardized contract under appropriate rules. The equilibrium distribution of market clearing prices is asymptotically normal with a standard deviation that varies inversely with the volume of trade, given underlying supply and demand conditions. Empirical relations giving the commission and margin per contract as a function of the volume of trade and outstanding commitments for 23 commodities support the theory. Also, comparisons of pertinent aspects of 51 commodities divided into active, less active, and dormant groups are consistent with the theory.