Futures margin meaning

This Practice Note sets out the core concepts and issues concerning ETDs, including: what ETDs are and how they operate how ETDs mitigate counterparty risk via clearing and collateralising trades how ETDs are traded and matched on a regulated exchange how ETDs are given-up for clearing, and how collateral is managed For more information on the differences between OTC derivatives and ETDs, see Practice Notes: OTC and exchange traded derivatives—key features and concepts and OTC and exchange traded derivatives—documentation. What are exchange traded derivatives? ETDs are derivative contracts entered into through a regulated exchange (the Exchange). The Exchange functions as a market mechanism that enables the exchange of offsetting derivative positions. It offers a venue where a relatively narrow range of futures and options is traded on standard terms. To be traded and matched on the Exchange, contracts must carry highly standardised terms and conditions. Unlike often bespoke OTC derivative contracts, ETDs are generally inflexible regarding the selection...

What are CCPs and what do they do? A central counterparty (CCP) is a form of financial institution, often called a clearing house, that enables the clearing of both over-the-counter (OTC) derivatives and exchange-traded derivatives (ETDs). CCPs are recognised as financial market infrastructures (FMIs). A derivative is a financial instrument whose value is set by reference to, and therefore derived from, an underlying asset, index, rate, reference point or risk (known as the underlying asset or simply the underlying). Derivatives are bi-lateral agreements that shift some or all of the risk and reward linked to the underlying from one party to another, without any immediate delivery of the underlying item. The terms of OTC derivatives are negotiated directly between the counterparties, or in certain instances arranged via a broker. OTC derivatives are distinct from derivatives, typically futures or options, that are traded on public exchanges (called exchange-traded derivatives or ETDs). For ETDs, contract terms are defined by the exchanges on which they trade, not by the contracting parties. ETDs...

What are CCPs and what do they do? A central counterparty (CCP) is a kind of financial institution, often called a clearing house, that enables the clearing of both over‑the‑counter (OTC) derivatives and exchange‑traded derivatives (ETDs) in financial markets. CCPs fall within the category of financial market infrastructures (FMIs) within financial markets. A derivative is a financial instrument whose worth is set by reference to, and thus derived from, an underlying asset, index, rate, reference point or risk, commonly termed the underlying asset or simply the underlying. Derivatives are bilateral contracts that shift some or all of the economic risk and return tied to the underlying from one counterparty to another, without any immediate delivery of the underlying item. For OTC derivatives, terms are negotiated directly between the parties themselves, or at times arranged via a broker acting as intermediary. These differ from derivatives—typically futures or options—traded on public exchanges, known as exchange‑traded derivatives (ETDs). For ETDs, contract terms are set by the exchange on which they...