EU derivatives regulation: a concise guide to EMIR, MiFID II/MiFIR, MAR, PRIIPs, CRR/CRD IV, BRRD, UCITS, AIFMD, Solvency II and CCP recovery and resolution
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Practice notes
OTC derivatives and ETDs
Derivatives fall into two principal categories:
- over the counter (OTC) derivatives, and
- exchange traded derivatives (ETDs)
OTC derivatives can be further divided into:
- non-cleared OTC derivatives, and
- cleared OTC derivatives, which combine characteristics found in both non-cleared OTC derivatives and ETDs
For additional detail on OTC derivatives and ETDs, see Practice Notes: OTC and exchange traded derivatives—key features and concepts and OTC and exchange traded derivatives—documentation.
Why are derivatives regulated?
Derivatives trading is a significant area of financial activity and has long been regulated—however, the purpose and scope of that regulation shifted after the 2007–2008 global financial crisis. Before the crisis, in broad terms:
- ETDs were regulated because they were traded on public exchanges and there was a wish to protect market users and the public from fraud, manipulation, and abusive practices, but
- OTC derivatives were viewed as private bilateral arrangements that could be left to the counterparties themselves and did not require regulation
The events of the crisis, and in particular the failures of the investment banks Bear Sterns and Lehmann Brothers in 2008, showed that large-scale trading of OTC derivatives between financial institutions is...
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Web page updated on 21/05/2026
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