Over-the-counter and exchange traded derivatives

There are two broad types of derivatives, Over the Counter (OTC) derivatives and Exchange Traded Derivatives (ETD’s). An OTC derivative is a privately negotiated contract between two parties. An ETD is bought or sold on an exchange like the ASX. Documentation differs between these types of derivative. All ETD derivatives are cleared as are most OTC derivatives however some OTC derivatives may not be cleared which may involve a greater risk than a cleared derivative. Derivatives will be settled either by cash or by physical delivery.

See Over-the-counter and exchange traded derivatives.