Overview of Derivatives

In this section

• What Is a Derivative?
  The basic definition of a derivative, the role of the underlying, and the main reasons market participants use these contracts.
• Common Features of Derivative Instruments
  The contractual, margin, leverage, settlement, and liquidity features that appear across most derivative markets.
• Types of Derivative Instruments
  The main derivative categories: forwards, futures, options, swaps, and selected specialized structures.
• Option-Based vs. Forward-Based Derivatives
  The difference between optional rights and binding forward obligations, including payoff, premium, and hedge trade-offs.
• Exchange-Traded and Over-the-Counter Derivatives
  How listed and OTC derivatives are organized, traded, cleared, and documented.
• Exchange-Traded vs. OTC Derivatives
  How exchange-traded and OTC derivatives differ in standardization, clearing, liquidity, transparency, and credit risk.
• Types of Underlying Interests
  How commodities, financial benchmarks, currencies, and other references serve as derivative underlyings.
• Why Derivatives Matter in Financial Markets
  Why hedgers, speculators, and arbitrageurs use derivatives to transfer risk and express market views efficiently.
• Operational Considerations in Derivatives Trading
  How trade capture, margining, settlement, reporting, and operational controls support derivatives trading.
• Who Uses Derivatives
  How commercial hedgers, institutions, dealers, funds, and retail investors use derivatives for different objectives.
• CIRO Regulation
  CIRO’s role in dealer oversight, market integrity, supervision, and investor protection within the Canadian derivatives environment.
• Emerging Asset Classes in Derivatives Markets
  How ESG-related and crypto-related underlyings are used in derivatives and why methodology and regulation matter.
• Technology in Derivatives Markets
  How electronic execution, automated trading, risk controls, and cyber resilience shape derivatives markets.
• Derivatives Exchanges and Clearinghouses
  How derivatives exchanges list contracts, match orders, and connect to clearinghouses such as CDCC.