CFM13050 - Understanding corporate finance: derivatives: exchange-traded and 鈥榦ver-the-counter鈥� products
Exchange-traded and OTC contracts
Derivatives can be either exchange traded or entered into and settled 鈥榦ver the counter鈥�:
Exchange-traded means that standardised derivatives are bought or sold on an established investment exchange, such as LIFFE (the London International Financial Futures and Options Exchange) (CFM13060). 皇冠体育app contractual arrangements will refer to a specific standardised underlying for delivery or valuation on a specified date. 皇冠体育app standard creates a large number of identical contracts to permit a liquid market in the derivative.
Over-the-counter (OTC) derivatives are normally bespoke contracts which are written by a bank or other financial institution to meet the requirements of a particular client. But the term can also include highly standardised derivative products traded off-exchange rather than under the rules of an investment exchange. (CFM13070).