There are 2 basic types of derivative markets:

• (A) Exchange Markets
• (B) Over-The-Counter (OTC) Markets.

(A) Exchange Markets – An exchange is an organization which provides facilities for buyers and sellers to trade derivatives. An exchange serves as a central meeting place so that buyers and sellers can easily find a counterparty to the contract they want to trade. Derivatives exchanges decide which contracts to trade, contract specifications and the rules for trading at their exchange. Exchange traded derivative contracts have standardized specifications. This standardization increases liquidity and allows market participants to easily change their positions. Futures contracts and most option contracts are traded on exchange markets. Listed below are some derivative exchanges from around the world:

Selected Derivatives Exchanges

1. Argentina – Bolsa de Comercio de Rosario (ROFEX) rofex.com.ar
2. Australia – Sydney Futures Exchange (SFE) – sfe.com.au
3. Brazil – Bolsa de Mercadorias & Futuros (BM&F) – bmf.com.br
4. Canada - Montreal Exchange - m-x.ca
5. China – China Financial Futures Exchange – cffex.com.cn
6. Germany – Risk Management Exchange – wtb-hannover.de
7. Greece – Athens Derivatives Exchange (ADEX) – adex.ase.gr
8. Hong Kong – Hong Kong Exchanges and Clearing – hkex.com.hk
9. Italy – Italian Derivatives Equity Market (IDEM) – borsaitaliana.it
10. Japan – Osaka Securities Exchange (OSE) – ose.or.jp
11. Korea – Korea Exchange (KRX) – krx.co.kr
12. Mexico - Mexican Derivatives Exchange - mexder.com
13. Pan-European – Eurex - eurexchange.com
14. Pan-European – Euronext.liffe – euronext.com
15. Russia – Moscow Interbank Currency Exchange – micex.com
16. South Africa – South African Futures Exchange (SAFEX) – safex.co.za
17. Spain – Mercado Oficial Español de Futuros y Opciones (MEFF) – meff.com
18. Taiwan – Taiwan Futures Exchange (TAIFEX) – taifex.com.tw
19. United Kingdom – London Metal Exchange – lme.co.uk
20. USA - Chicago Board Options Exchange (CBOE) – cboe.com
21. USA - Chicago Climate Exchange (CCX) – chicagoclimatex.com
22. USA - Chicago Mercantile Exchange (CME) – cme.com

(B) Over-The-Counter (OTC) Markets - The other type of market for derivatives is the over-the-counter, or OTC, market. In the OTC market, there is no central place or organization where buyers and sellers meet. In the OTC market buyer and seller find each other and work directly with each other to formulate, execute and enforce a derivative transaction. Contracts in the OTC market are not standardized. Instead the buyer and seller have complete freedom in designing the specifications of their contract. This ability to tailor a contract to the exact needs of the counterparties is among the chief benefits of OTC derivatives. Forward contracts, most swap contracts and most exotic derivative contracts are traded in the OTC market.