As part of futures trading,exchanges have traders place an initial margin with its clearing house because:
A) as the exchange has to cover its costs.
B) as it acts like a performance bond to support the value of the futures contract.
C) the exchange wants to ensure that brokers make profits.
D) the exchange wants to ensure that futures contracts can be closed-out.

Question

Quizplus · Accepted Answer

The initial margin acts as a performance bond to support the value of the futures contract, ensuring that the parties fulfill their obligations. It is not primarily to cover the exchange's costs, ensure broker profits, or facilitate close-out of contracts.

As Part of Futures Trading,exchanges Have Traders Place an Initial