Financial exchanges are marketplaces, both physical and digital, that facilitate the buying and selling of various financial assets.

Exchanges

In addition to their traditional role as trading venues, many exchanges are involved in financial product development. They create and introduce new financial instruments, such as futures contracts, to meet market demands.

Exchanges often provide additional data services, including market data and analytics, to help market participants make informed trading decisions. One recent example would be CME’s FedWatch tool.

Types

• Stock Exchanges: These exchanges enable the trading of publicly listed company shares. Examples of stock exchanges include the New York Stock Exchange (NYSE), NASDAQ, and the London Stock Exchange.
• Futures/Commodities Exchanges: Futures exchanges facilitate the trading of futures contracts and physical commodities. These exchanges help manage price and counterparty risks for producers and consumers of commodities. Examples include the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE).
• Options Exchanges: Options exchanges provide a marketplace for trading options contracts. Some well-known options exchanges include the Chicago Board Options Exchange (CBOE), NYSE Amex, NYSE Arca, BOX Options Exchange, NASDAQ PHLX, Eurex, and MIAX.

Examples

While many exchanges have transitioned to electronic trading, some options exchanges, for example, still maintain physical trading floors where select block trades are executed as required by regulatory rules.

Clearinghouses

Clearinghouses serve as intermediaries, ensuring the efficient clearing and settlement of trades while significantly reducing counterparty risk.

Clearinghouses and Counterparty Risk