who can tell me what it is and give me an example thanks
A throughput arrangement involves an agreement to put a specified amount of product per period through a particular facility; for example, an agreement to ship a specified amount of crude oil per period through a particular pipeline
…at a previously specified price…correct?
How does it differ from a forward contract? S
A fwd contract is a future stating you will buy whatever the commodity, currency, etc. In other words you are buying that product or good regardless of future market conditions. A throughput actually involves ‘service’. A fwd contract you would agree to buy for X amount per barrel, times so many barrels. Now how you get the oil is irrelvant. A throughput lays out the means along with price of the barrel delivery. Consider this-a forward contract, like almost all future contracts, is never held to materalization. In other words if you buy a fwd contract on eggs at a particular price in the future very rarely will these be excercised. Often times they are sold and cleared by the futures exchange. A futures market merely determines what the going price is for that time. Imagine if this did not exist, farmers would never know how much to plant because the there would be no idea of prices so you would suffer from bumper or too few crops (mined gold, drilled oil, cattle raised, etc) available for sale. A throughput involves the actual good/commodity being delivered. Please forgive me, I know this appears to be a long winded approach at trying to explain. I hope it helps.