Futures Exchanges

Executive summary

Although the derivatives market is largely traded OTC, the listed futures market specifically trades on an exchange. Futures are ideal to be traded on exchanges because they are standardised by size, the underlying instrument and delivery date. The only negotiable element is price.

Key learning objectives:

  • Explain why futures are ideal to be traded on an exchange
  • Identify the largest futures exchanges

Why are futures suited to be traded on exchanges?

Futures are made to be traded on exchanges due to its standardisation. Contracts are standardised in terms of:

  1. Size
  2. The underlying instrument or commodity
  3. Delivery date

Therefore, no discussion is needed and trading is only a matter of price. As all trades need to be continually margined and netted, it makes sense for operational efficiency to combine functions on an exchange.

What are the largest futures exchanges?

The largest futures exchanges are:

  1. The CME Group (including the Chicago Mercantile Exchange, Chicago Board of Trade, and New York Mercantile Exchange and Commodity Exchange)
  2. The National Stock Exchange of India
  3. The Intercontinental Exchange
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