The most important feature of futures markets is a tool of avoiding price risk to market participants. Market participants achieve risk mitigation through hedging on futures markets, to avoid the risk of price volatility, lock in production costs and gain the expected profits. Futures markets make up for the deficiencies of the spot markets.

In an open economy, price is determined by the supply and demand of the market. Futures prices as reference prices faithfully reflect market demand and supply based on the massive amount of information comes from the trading of futures investors, and the standardization of futures contracts increases market liquidity. This is the “price discovery” function.

First of all, futures markets trade the contracts which will be performed in a certain time of the future. Before the production cycle starts, buyers and sellers can predict and guide the future demand and supply of commodities through the futures prices. This is the function of stabilizing demand and supply. In addition, price risk taken by buyers and sellers is spread to all investors of futures markets, because of the participation of speculators and the multiple transfers of futures contracts, so that the risk of price volatility taken by each investors is reduced.

Futures exchanges provide safe, accurate and liquid futures trading performs to all investors, which increase trading efficiency, decrease credit risk and contribute to the market development and improvement.

Futures are the important investment tools and help the rationally use of social idle capital.