One advantage of trading standardized contracts on an exchange is that there is a lot more
liquidity for such contracts. There is an infinite number of possible specifications of a forward
contract and finding a counterparty who would be interested in the particular structure of the
forward contract and willing to take the opposite side would be a challenge. This problem is
further complicated by the fact that the potential buyers and sellers are scattered throughout the
world. However, when everyone in the market trades the same contract in one place (i.e., the
exchange), it is a lot easier to find a buyer or a seller—hence, there is more liquidity