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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1 min 19 secs
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
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Futures are made to be traded on exchanges due to its standardisation. Contracts are standardised in terms of:
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.
The largest futures exchanges are:
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