Market structure

A basic function of exchange-traded derivatives markets is to provide liquidity through large volume, standardized contracts, price transparency, and the interposition of the clearing house as a central counterparty.By contrast, over-the-counter markets provide users with contracts that can be tailored to individual requirements.These services tend to be complementary, so that growth on one side of the market usually supports expansion in other sectors.

In exchange-traded markets the exchanges have formed trading alliances and links that facilitate 24-hour trading.Agreements between European and Asian exchanges capitalize on the growth of cash and forward European currency trading in Asia, and on the development of markets in yen products in Europe.Bilateral trading links have become a widespread means of facilitating round-the-clock trading and wider access.Leading exchanges include the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), and the London International Financial Futures and Option Exchange (LIFFE).