Futures Contracts
The exchange provides a number of mechanisms to minimize the counterparty default risk:
(1) Daily settlement (or marking to market) , in which the profit or loss resulting from the movement in the value of the underlying asset is recognized on the account of each party to the futures contract each day.
(2) Margins, which involve the posting of capital to help ensure performance.
(3) The exchange clearinghouse, which helps to future guaranty performance by interposing itself between the seller and buyer in futures transaction. Currency futures are traded on major currencies, and are (as are other type of futures) identified according to the month during which they expire.