Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
You pay money (or money's worth) now, and take delivery of goods or services later, receiving a certificate of entitlement (on your mobile phone) in the meantime. The certificate does not entitle you to demand delivery (as a futures contract would) but if you do take delivery from the issuer (or from another affiliated within a clearing union), he undertakes to accept the certificate in payment.
If denominated in a delivarable (such as energy), what prevents more certificates from being prepaid thanit is physically possible to take delivery of?

And no, "transparency" doesn't cut it because the producer will always enjoy an asymmetric information advantage. And not everyone is a hedge fund. Buyers also have differring levels of informacion.

Finance is the brain [tumour] of the economy

by Carrie (migeru at eurotrib dot com) on Sat Sep 7th, 2013 at 04:56:28 PM EST
[ Parent ]

Others have rated this comment as follows:


Occasional Series