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What Types of Forward Transactions are there?

Forward transactions can be divided into conditional and unconditional transactions. Generally, forward transactions are traded on derivative exchanges such as Eurex Exchange as well as over-the-counter (OTC). The term OTC basically means that the trade takes place directly between two trading partners without an exchange as an intermediary. This often is done via telephone which is why in Germany these types of trades are also called “Telefonhandel”.

The chart below gives you an overview but please note that not all types of existing forward transactions are covered.

In reality, many differences between standardized exchange products and individual OTC derivatives are becoming blurred more and more. On the one hand, many OTC traded derivatives are showing standardized contractual components. On the other hand, Eurex Exchange offers its participants to enter OTC traded derivatives into the Eurex System for settlement purposes. Eligible products can be standardized Eurex products but also so-called Flex products where certain contractual components may be customized.

The functionalities described as EurexOTC Trade Entry Services next to the entering of flex products also encompass for instance the entering of block trades or in other words, larger, bi-lateral, off-exchange trades with an respective minimum of traded contracts to be traded. Another example is the exchange for physicals functionality where for instance a combination of bonds and Eurex Fixed Income Futures are traded off-exchange with the futures being booked into the Eurex system.

You can find a description of all the services here: Eurex OTC Trade Entry

For all futures and options (Eurex derivatives) traded on Eurex Exchange as well as all trades entered via EurexOTC Trade Entry services, Eurex Clearing acts as the central counterparty. Eurex Clearing’s OTC business does not only encompass EurexOTC Trade Entrey but also EurexOTC Clear where it acts as the central counterparty for interest rate swaps, equities and credit derivatives (CDS, Eurex Credit Clear).

You can find further information here:

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