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8.3 Which of the following has provided a major inducement for speculators to participate in the futures market? a) low margi

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Answer #1

Answer - Low margin requirement

Reason - Trading in future market would have been heavy investment task because shares are to be purchased in lots and lots usually contains thousands of shares in them and if whole amount is to be paid upfront, it would be a risk task to speculate in such market.

There comes the concept of margin money. It is a percentage fixed by the broker which allows the speculator or trader to invest for a larger amount of shares with a small percentage of Money kept as margin with the broker. If the prices of shares fall, the broker may ask for more margin and on the settlement date the profit or loss is set off against margin money.

Due to low margin requirements by brokers the speculators are encouraged to participate in future market.

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