Currency futures are futures markets where the underlying commodity is a currency exchange rate, such as the Euro to US Dollar exchange rate, or the British Pound to US Dollar exchange rate. Currency futures are essentially the same as all other futures markets (index and commodity futures markets), and are traded in exactly the same way.
Futures based upon currencies are similar to the actual currency markets (often known as Forex), but there are some significant differences. For example, currency futures are traded via exchanges, such as the CME (Chicago Mercantile Exchange), but the currency markets are traded via currency brokers, and are therefore not as controlled as the currency futures. Some day traders prefer the currency markets, and some day traders prefer the currency futures. I recommend the currency futures as they do not suffer from some of the problems that currency markets suffer from, such as currency brokers trading against their clients, and non centralized pricing.
Settlement and Delivery
As currency futures are based upon the exchange rates of two currencies, they are settled in cash, in the underlying currency. For example, the EUR futures market is based upon the Euro to US Dollar exchange rate, and has the Euro as its underlying currency. When a EUR futures contract expires, the holder receives delivery of $125,000 worth of Euros in cash. Note that this only happens when the contract expires, and as day traders do not usually hold futures contracts until they expire, they should not be involved in the settlement, and will not receive delivery of the underlying currency.
Popular Currency Futures
Many of the most popular futures markets that are based upon currencies are offered by the CME (Chicago Mercantile Exchange), including the following :
EUR - The Euro to US Dollar currency future
GBP - The British Pound to US Dollar currency future
CHF - The Swiss Franc to US Dollar currency future
AUD - The Australian Dollar to US Dollar currency future
CAD - The Canadian Dollar to US Dollar currency future
RP - The Euro to British Pound currency future
RF - The Euro to Swiss Franc currency future
Complete descriptions of many of the above currency futures, including the exchange rate that they are based upon, the futures contract specifications, and the market holidays, are available in their Market Profiles.