It stands for exchange-traded derivative; a derivative instrument that is traded via organized derivatives exchanges, i.e. where traders buy and sell standardized contracts as defined by the exchange. A derivatives exchange assumes the role of an intermediary (clearinghouse) between a pair of counterparties, that is, it acts as a counterparty to a given counterparty in case the original party defaults on its obligations. To that end, the exchange imposes margin requirements (initial margin) on both sides of the trade and uses such amounts as a guarantee for performance.
Examples of exchange-traded derivatives include exchange-traded options, futures, etc.
Comments