Exchange Traded Market

In the exchange traded segment of the market, which covers currency futures and exchange traded currency options, the institutional structure and the role of brokers are different from those in the OTC market.

In the exchanges, orders from customers are transmitted to a floor broker. The floor broker then tries to execute the order on the floor of the exchange (by open outcry), either with another floor broker or with one of the floor traders, also called “locals,” who are members of the exchange on the trading floor, executing trades for themselves.
Each completed deal is channeled through the clearinghouse of that particular exchange by a clearing member firm. A participant that is not a clearing member firm must have its trades cleared by a clearing member.



The clearinghouse guarantees the performance of both parties, assuring that the long side of every short position will be met, and that the short side of every long position will be met. This requires (unlike in the OTC market) payment of initial and maintenance margins to the clearinghouse (by buyers and sellers of futures and by writers, but not holders, of options). In addition, there is daily marking to market and settlement.
Thus, frequent payments to (and receipts from) brokers and clearing members may be called for by customers to meet these daily settlements.