Derivatives Exchange Membership

Derivatives Exchange Membership

Abdulla Javeri

30 years: Financial markets trader

In the final video of this series on derivatives exchanges, Abdulla examines the membership structure of those exchanges whilst noting that not all exchanges will be identical.

In the final video of this series on derivatives exchanges, Abdulla examines the membership structure of those exchanges whilst noting that not all exchanges will be identical.

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Derivatives Exchange Membership

5 mins 22 secs

Overview

Exchange membership is a requirement to directly access the facilities of an Exchange, primarily its trading platform.

Key learning objectives:

  • Understand the difference between Clearing and Non-Clearing Members

  • Understand the relationship between Clearing members, Non-Clearing members and the Clearing House

  • Outline the process of how trades are registered with the Clearing House

  • Identify the application and limits of Clearing House guarantees

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Summary

What are the cons of Exchange Membership?

Membership provides benefits, but it also imposes obligations to adhere to the rules of the Exchange e.g. in respect of minimum financial resources, regulatory approvals, dispute resolution and general conduct in relation to off-Exchange clients and other Exchange members.

What are the types of members?

There are a number of ‘levels’ of Exchange membership, generally described as Clearing Members and Non–Clearing Members.

Clearing Members are subject to substantially higher capital requirements than their Non Clearing counterparts.  There is often a further sub category, Public Order and Non Public Order, which defines whether the Non Clearing member is allowed to directly execute trades on behalf of their clients who are not exchange members.

What is the exchange membership criteria?

As long as you can satisfy the criteria set by the Exchange, anyone can become a member. The criteria will include capital requirements as well as the necessary regulatory requirements imposed by financial regulators.

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Abdulla Javeri

Abdulla Javeri

Abdulla’s career in the financial markets started in 1990 when he entered the trading floor of the London International Financial Futures Exchange, LIFFE, and qualified as a pit trader in equity and equity index options. In 1996, Abdulla became a trainer for regulatory qualifications and then for non-exam courses, primarily covering all major financial products.

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