Exchange Traded Derivative

An exchange-traded derivatives contract, also known as a listed contract (as distinct from an over-the-counter contract) is an agreement to buy and sell derivatives on a regulated derivatives or stock exchange where the exchange acts as the counterparty to both sides and takes care of central clearing, thereby neutralising counterparty risk. Contracts are standardised as to quality and quantity of underlyings as well as delivery times and, for physical delivery, locations. Listed derivatives contracts are identical for all participants, facilitating trading. The single variable in a listed derivatives trade is the price at which the trade takes place. This is achieved through price matching based on bids and offers.