As we all know the transaction that has the highest risk could potentially yield the greatest return. However, when dealing in the international market some risks aren't preferred; such as in currency markets. To hedge this risk companies engage in the trading of futures contracts. These contracts require a set amount of available currency to be purchased, on a set date, and at a fixed exchange rate. However, due to the volatility of the currency market and the ease with which any person can setup shop and begin trading, some safeguards were set in place to limit the risk of people losing everything. The safeguards include daily price limits, margin call, marking to market, eliminating default and cancelling delivery. People might wonder how marking to market could be used as a safeguard when it contributed to the infamous downfall of Enron. In Enron's case the lack of objectivity in determining market price lead to them manipulating the price to achieve outrageous valuations on their income statements. Due to the cutting-edge technology of the company they were able to be the industry leaders. This enabled them to set the market price. However, if done correctly, marking to market would require the losses and/or gains that were incurred during the trade day to be recorded and collected. This is calculated by the difference between market value and the cost of the contract. If the difference is a loss then a margin is collected. The margin is a percentage of the contract amount that is being traded. By collecting this margin it safeguards the trader and the exchange from massive loss that the trader could potentially not afford and default on. Because this is done on a daily basis, if at any given time the margin account drops to an unacceptable level the trader must replenish it.