Advantages Basis risk 4 tends to be small because contracts are customized to meet the specific needs of the users. No initial capital is required to participate in the market. Contract terms are negotiable so that they could be longer than those of standardized contracts. Contract can be transferred to another person. Contracts are fungible.
Prices are fairly transparent.
Regulations of Exchanges apply to all transactions. No negotiation is necessary to participate in the market so that anybody can participate with initial deposit. Disadvantages Contract cannot be reversed or transferred to another person. Prices tend to be less transparent because they are negotiated between two parties. Transactions are not monitored so that counterparty risks remain.