Hedging, either one wants to secure (lock-in) the price of future spot market positons ( long hedge ), or one wants to secure the price of currently owned spot market positions. Trading, one takes risks in order to make profits. In arbitrage, one tries to realize price differences of different positions (eg. a stock and future on that stock)
The (futures) exchange guarantees the fulfillment of the trades. The (futures) exchange calculates the payment obligations of the clearing members. (often even daily resettlement) The (futures) exchange allows effective pricing for the derivatives The (futures) exchange allows standardization (fixed quantity, fixed place, fixed delivery dates, standardized contract types) The standardization work of an exchange organization leads to more liquidity for […]