Derivatives Market Law and Legal Definition

Derivatives Market is the financial market for derivatives. It is where exchange of financial instruments like futures contracts or options takes place. Derivatives are one type of securities whose price is derived from the underlying assets. These underlying assets are most commonly stocks, bonds, currencies, interest rates, commodities and market indices.

The Derivative Market can be classified as Exchange Traded Derivatives Market and Over the Counter Derivative Market. Exchange Traded Derivatives are those derivatives which are traded through specialized derivative exchanges whereas Over the Counter Derivatives are those which are privately traded between two parties and involves no exchange or intermediary. Swaps, options and forward contracts are traded in over the counter derivatives market or OTC market.