Introduction to Futures Exchanges
Peter Eisenhardt
30 years: Capital markets & investment banking
In this video, Peter covers futures exchanges - the one exception to over-the-counter derivatives markets.
In this video, Peter covers futures exchanges - the one exception to over-the-counter derivatives markets.
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Introduction to Futures Exchanges
1 min 19 secs
Key learning objectives:
Explain why futures are ideal to be traded on an exchange
Identify the largest futures exchanges
Overview:
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.
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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:
- Size
- The underlying instrument or commodity
- 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:
- The CME Group (including the Chicago Mercantile Exchange, Chicago Board of Trade, and New York Mercantile Exchange and Commodity Exchange)
- The National Stock Exchange of India
- The Intercontinental Exchange
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