Derivatives Transaction Execution Facility (DTEF)

Derivatives Transaction Execution Facility (DTEF)

A derivatives transaction execution facility (DTEF) is a market that focuses on supporting the transaction of derivatives limited to underlying assets of excluded commodities or assets with an inexhaustible and deliverable supply. Because DTEFs are not open to retail investors, investors must belong to an eligible commercial entity, be an eligible contract participant, or transact through a futures commission merchant. Retail participants may trade on DTEFs through high net worth futures commission merchants with at least $20 million of adjusted net capital in their accounts. Derivative transaction execution facilities are not open to retail investors. A derivatives transaction execution facility (DTEF) is a market that focuses on supporting the transaction of derivatives limited to underlying assets of excluded commodities or assets with an inexhaustible and deliverable supply. A derivatives transaction execution facility (DTEF) focuses on supporting the transaction of derivatives limited to underlying assets of excluded commodities or assets with an inexhaustible and deliverable supply. The two main types of underlying assets in the U.S. options market are securities options, including stock options and futures options.

A derivatives transaction execution facility (DTEF) focuses on supporting the transaction of derivatives limited to underlying assets of excluded commodities or assets with an inexhaustible and deliverable supply.

What Is a Derivatives Transaction Execution Facility (DTEF)?

A derivatives transaction execution facility (DTEF) is a market that focuses on supporting the transaction of derivatives limited to underlying assets of excluded commodities or assets with an inexhaustible and deliverable supply. A derivatives transaction execution facility allows for the execution of commodities with no cash market. All products listed on the exchange must not be susceptible to measures of influence or manipulation.

A DTEF provides a venue for the trading of excluded commodities, such as interest or exchange rates and other derivatives. DTEFs bring liquidity to the trade of limited sets of commodities.

A derivatives transaction execution facility (DTEF) focuses on supporting the transaction of derivatives limited to underlying assets of excluded commodities or assets with an inexhaustible and deliverable supply.
DTEFs allow for the execution of commodities with no cash market.
Because DTEFs are not open to retail investors, investors must belong to an eligible commercial entity, be an eligible contract participant, or transact through a futures commission merchant.
Retail participants may trade on DTEFs through high net worth futures commission merchants with at least $20 million of adjusted net capital in their accounts.

Understanding a Derivatives Transaction Execution Facility (DTEF)

Derivative transaction execution facilities are not open to retail investors. To trade on this exchange, an investor must belong to an eligible commercial entity, be an eligible contract participant, or transact trades through a futures commission merchant.

Retail participants may trade on DTEFs through high net worth futures commission merchants (FCMs) with accounts with an adjusted net capital of at least $20 million. A registered commodity trading investor who directs trading for accounts containing total assets of at least $25 million may also trade for the retail investor.

Derivative transaction execution facilities must register with the Commodity Futures Trading Commission (CFTC). The CFTC grants the facilities with fewer regulatory requirements than other contract markets. The CFTC receives reports and data on significant trader transactions. The regulatory commission also assesses derivative transaction execution facilities’ compliance programs via rule enforcement reviews.

The Role of Underlying Assets in a Derivatives Transaction Execution Facility (DTEF)

Derivative prices depend on the underlying assets. Underlying assets include stocks, futures, commodities, and currencies. The underlying asset may also be an index, such as the S&P 500. In this case, the underlying asset is made from all of the common stock listed on that index.

The two main types of underlying assets in the U.S. options market are securities options, including stock options and futures options. In a case that involves stock options, the underlying asset is the stock itself. In futures options, a futures trader will buy or sell a contract that promises to deliver an underlying asset on a particular date.

Investors use underlying assets and options as a way of speculating and hedging risk. The value of an underlying asset could increase or decrease over time, which therefore changes the value of its option. In a contract for difference (CFD) trade, the underlying asset is never actually bought or sold, but the profit or loss depends on the price movement of the underlying asset of the position taken.

Related terms:

Commodity Futures Trading Commission (CFTC)

The CFTC is an independent U.S. federal agency established by the Commodity Futures Trading Commission Act of 1974. read more

Contract for Differences (CFD)

A contract for differences (CFD) is a marginable financial derivative that can be used to speculate on very short-term price movements for a variety of underlying instruments. read more

Exempt Commodity

An exempt commodity is any commodity other than an excluded or agricultural commodity.  read more

Futures Commission Merchant (FCM)

A futures commission merchant (FCM) solicits or accepts orders to buy or sell futures contracts or options on futures for a payment from customers. read more

National Futures Association (NFA)

National Futures Association (NFA) is an independent, self-regulated entity for the U.S. derivatives industry that mandates industry best practices. read more

Qualified Eligible Participant (QEP)

A qualified eligible participant (QEP) is an individual who meets the requirements to trade in different investment funds, such as futures and hedge funds. read more

S&P 500 Index – Standard & Poor's 500 Index

The S&P 500 Index (the Standard & Poor's 500 Index) is a market-capitalization-weighted index of the 500 largest publicly traded companies in the U.S. read more

Swap Execution Facility (SEF)

A Swap Execution Facility (SEF) is a trading platform that enables many participants to execute or trade swaps in a regulated and transparent manner. read more

Underlying Asset

An underlying asset is a financial instrument upon which a derivative's price is based. read more