How Do Exchanges Decide Which Derivatives Are Standardized Enough to Be Listed on a CLOB?
Exchanges decide to list a standardized derivative on a CLOB based on anticipated customer demand and the potential for sufficient liquidity. They conduct market research to identify a common hedging or speculative need that can be met with a fungible contract.
The underlying asset must have a reliable and transparent price. The exchange then designs the contract with standardized terms (size, expiration, etc.) that are simple enough to attract a broad range of market participants, from institutions to retail traders, ensuring a deep and active order book can be sustained.
Glossar
CLOB
Execution ⎊ Central Limit Order Books (CLOBs) represent the foundational infrastructure for price discovery and trade execution within cryptocurrency exchanges and regulated derivatives markets, functioning as a digitized order book mirroring traditional financial systems.
Standardized Terms
Definition ⎊ Standardized Terms in derivatives refer to the universally accepted conventions, definitions, and specifications used across the industry for instruments like futures and options, ensuring fungibility and clear market communication.
Listed Derivatives
Derivative ⎊ These standardized financial instruments, known as Listed Derivatives, are contracts whose value is derived from an underlying asset, such as a cryptocurrency, commodity, or index.
Anticipated Customer Demand
Forecast ⎊ Anticipated customer demand represents the forward-looking quantitative projection of trading volume and open interest for a new or existing crypto derivative product.