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Trading and Investment Terms

Exchange Traded Derivative

An exchange traded derivative can be defined as a financial agreement that is listed as well as trades on a regulated stock market exchange.


Basically, these are derivatives that are traded in a controlled manner.


Exchange traded derivatives have become progressively well known on account of the advantages they provide in comparison to over the counter (OTC) derivatives, for example, normalization, liquidity, and end of default risk.


Futures as well as options are two of the most well known exchange traded derivatives.


Exchange traded derivatives can be utilized to hedge exposure or hypothesize on a wide array of financial securities like commodities, stocks, currencies, as well as interest rates.


Exchange traded derivatives can be options contracts, futures contracts, as well as other financial agreements that are listed and exchanged on regulated stock market exchanges such as the Chicago Mercantile Exchange (CME), International Securities Exchange (ISE), the Intercontinental Exchange (ICE), or the LIFFE exchange in London, to name just a small few.


Exchange traded derivatives are appropriate for the retail investor, not at all like their over the counter cousins.


In the OTC market, it is anything but difficult to become mixed up in the multifaceted nature of the instrument and the specific idea of what is being traded.