MF Global

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For centuries, futures markets have provided the means by which producers and users of commodities and financial products can obtain protection from unexpected and unfavourable price movements.

Today, the futures industry is one of the largest and most dynamic sectors of the world's financial markets. In 1998, a staggering 2.1 billion futures and options contracts were traded on the world's futures exchanges in centres as far apart as Montreal to Sydney and Johannesburg to Madrid.

In Australia, the importance of futures to both the financial markets and to the wider economy is profound. On any given day, the value of turnover at the Sydney Futures Exchange averages around A$40 billion and can peak to three times this figure during periods of high volatility. The customers using the market encompass the full spectrum of participants, both domestic and international, and range from large banks and Government authorities to small companies and individuals.

While the bulk of activity in the futures market has traditionally come from institutional users such as investment banks, fund managers and Life offices, recent years have seen the emergence of a new and important player - the private trader.

Like their institutional brethren, savvy private traders have discovered the value of futures markets both as a tool for risk management and as an investment medium. These traders who traditionally confined their activities to the stockmarket, have been drawn to the futures market in increasing numbers because of the speed, liquidity and efficiencies that futures provide. Advances in technology, the listing of products better tailored to the needs of private traders and the increasing sophistication of investors are just some of the other factors responsible for the increased popularity of futures.

Despite the rapid rise in trader numbers, the futures market still remains a mystery to many traders and investors. Accordingly, this booklet has been written with the specific purpose of helping aspiring traders to come to terms with the many machinations of the futures market. While it may not answer every question you have, our hope is the booklet will give you the confidence to ask questions and to find out more about the market. Armed with this knowledge, you will then be able to make an informed decision as to whether or not futures and options are appropriate given your specific needs and investment objectives.