Exchange markets are said to have transparency, which means that full information on all transactions is disclosed to exchanges and regulatory bodies. All transactions are centrally reported within the exchanges and their clearinghouses, and specific laws require that these markets be overseen by national regulators. Although this would seem a strong feature of exchange markets, there is a definite cost. Transparency means a loss of privacy: National regulators can see what transactions have been done. Standardization means a loss of flexibility: A participant can do only the transactions that are permitted on the exchange. Regulation means a loss of both privacy and flexibility. It is not that transparency or regulation is good and the other is bad. It is simply a trade-off.

Derivatives exchanges exist in virtually every developed (and some emerging market) countries around the world. Some exchanges specialize in derivatives and others are integrated with securities exchanges.

Although there have been attempts to create somewhat non-standardized derivatives for trading on an exchange, such attempts have not been particularly successful. Standardization is a critical element by which derivatives exchanges are able to provide their services. We will look at this point again when discussing the alternative to standardization: customized OTC derivatives.