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Overview

Welcome to the world of listed derivatives. Here you will find information on
listed derivatives trade processing.

Introduction
Derivatives are financial instruments whose value changes in response to the
changes in underlying variables. The main types of derivatives are futures,
forwards, options, and swaps. The main use of derivatives is to reduce risk for
one party. Derivatives can be based on different types of assets such as
commodities, equities (stocks), bonds, interest rates, exchange rates, or indexes.
Listed Derivatives, also known as exhcnage traded derivatives are those
derivatives products that are traded via specialized derivatives exchanges or
other exchanges.

Volumes (Source FIA)


See Listed Derivatives Trading Volumes by category, region, exchanges and months.

Process Flow
See Listed Derivatives Process Flow for details of how listed derivatives trades
are processed post-trade.

Challenges in Listed Derivatives Processing


Listed derivatives volumes have risen significantly in past years and are expected
to triple in next 3 years. The biggest impact of this on broker dealers is on
their ability to process the trades with minimal errors, time and manual effort.
Broker dealers will continue to focus on reducing errors in trade processing,
reporting and book keeping, reducing loss of revenue due to inaccurate fees,
regulatory fines due to incorrect reporting, minimizing redundancy across various
teams, automating manual processes to reduce cost and operational risk, handling
increasing trade volumes, newer complex products and backlogs, leveraging common
processes and existing systems across asset classes and geographies and syncing
with new developments in exchange/clearing house technology and processes.
Following are the challenges in listed derivatives processing:
Reconciliations
Real Time Risk Management
Reference Data Management
Margin Management
Fees and Commissions Management
Corporate Actions Processing
Options Symbology

Useful Links for Learning


Good introduction to listed derivatives:
http://www.cme.com/files/Exchange_Traded_Derivat.pdf
Statistics on listed derivatives: http://www.bis.org/statistics/extderiv.htm
CBOT introduction to trading in futures: http://www.cbot.com/cbot/docs/57670.pdf
Good comparison of US and European listed derivatives exchanges:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=748968

Regulatory Bodies
Futures Industry Association http://www.futuresindustry.org/
Options Clearing Corporations: http://www.optionsclearing.com/
Commodity Futures Trading Commission: http://www.cftc.gov/
National Futures Association: http://www.nfa.futures.org/

Good Books
Clearning & Settlement of Derivatives by David Loader
Options, Futures & Other Derivatives by J.C. Hull
An Introduction to Derivatives and Risk Management by Don Chance