What is the role of exchange in derivative instruments?

[Darshan Arvindbhai Shah]

When it comes to role of exchange we can say that ..

Exchange plays role of mediator

Specially when it comes to option trading it may possible that one of the buyer or seller can go default

while executing the deal buyer or seller may have to face  big loss and chances of going default can acre

to avoid this kind of situation Exchange ask some amount of caution money from both before signing the contract

so that exchange it self make sure that while execution of  contract   no one deny to pay the loss

 

And when it comes to future trading exchange ask for margin money which is in context to the share price

and lot size of the company before any future contract has been made. One remarkable thing is if you have

bought something from future segment in case price goes down that means you have lost the difference amount

and though exchange debit your account on day to day basis and if you are making profit then exchange credit

your account on day to day basis only

 

It means no matter whatever derivative instruments you take for trading

Exchange does the settlement process    

[Supriya Rayabhagi]

Exchange provides a market place, plays middleman role and fixes the margin or premium in derivative market.

[Elanthiraiyan]

Exchange monitors the  trade and makes the settlement on the trade

[Shiva]

Exchange plays the role of the mediator.

In case of options Premium amount is ensured and in case of futures margin amount is ensured and the final settlement is done through exchange.

[Gogaya]

Probably take care of Settlement.

[Author]

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