Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Exchange traded definition

What does Exchange traded mean? In legal and market practice, “exchange-traded” (or “exchange traded”) describes a transaction or instrument executed on a recognised investment exchange in the UK or a regulated market in Ireland, rather than over-the-counter (OTC). Trades are entered under the exchange’s rulebook, usually via a member firm, and are typically cleared through a central counterparty (CCP) that novates the contract and becomes the buyer to every seller and the seller to every buyer. This structure reduces bilateral counterparty credit risk through initial and variation margin and default fund protections, and promotes transparency and standardisation. The expression is descriptive rather than...

Exchange-Traded Derivatives: Standardisation, Trading, Central Clearing, Novation/Give-Ups, Collateral and EMIR Reporting

Published by a LexisNexis Banking & Finance expert

Practice notes

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 of underlying assets, maturity, contract size and delivery terms. Most of these terms are in fact usually determined...

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Web page updated on 21/05/2026

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