OverviewWelcome to the world of listed derivatives. Here you will find information onlisted derivatives trade processing.IntroductionDerivatives are financial instruments whose value changes in response to thechanges in underlying variables. The main types of derivatives are futures,forwards, options, and swaps. The main use of derivatives is to reduce risk forone party. Derivatives can be based on different types of assets such ascommodities, equities (stocks), bonds, interest rates, exchange rates, or indexes.Listed Derivatives, also known as exhcnage traded derivatives are thosederivatives products that are traded via specialized derivatives exchanges orother exchanges. Volumes (Source FIA)See Listed Derivatives Trading Volumes by category, region, exchanges and months. Process FlowSee Listed Derivatives Process Flow for details of how listed derivatives tradesare processed post-trade.Challenges in Listed Derivatives ProcessingListed derivatives volumes have risen significantly in past years and are expectedto triple in next 3 years. The biggest impact of this on broker dealers is ontheir 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 variousteams, automating manual processes to reduce cost and operational risk, handlingincreasing trade volumes, newer complex products and backlogs, leveraging commonprocesses and existing systems across asset classes and geographies and syncingwith new developments in exchange/clearing house technology and processes.Following are the challenges in listed derivatives processing:ReconciliationsReal Time Risk ManagementReference Data ManagementMargin ManagementFees and Commissions ManagementCorporate Actions ProcessingOptions Symbology Useful Links for LearningGood introduction to listed derivatives:http://www.cme.com/files/Exchange_Traded_Derivat.pdfStatistics on listed derivatives: http://www.bis.org/statistics/extderiv.htmCBOT introduction to trading in futures: http://www.cbot.com/cbot/docs/57670.pdfGood comparison of US and European listed derivatives exchanges:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=748968Regulatory BodiesFutures 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 BooksClearning & Settlement of Derivatives by David LoaderOptions, Futures & Other Derivatives by J.C. Hull
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