Benefits of OTC Products

Trading over-the-counter (OTC) products with StoneX Markets LLC (SXM) enables customers to construct hedges that can meet their unique needs more closely than hedges based on exchange-traded products alone.

Customizability

SXM can develop OTC products to fit many different risk profiles or market views These customizable instruments can offer specifications not available through exchange-traded contracts (e.g. non-standard quantities, strike prices, expiration dates, etc.) and can be tailored to meet each customer’s individual needs. This flexibility enables us to construct solutions that offer opportunities to sell above or buy below the current market, fixed cash pay-out, guaranteed quantity, zero-cost up-front features or a combination of these features. (Note: Along with its benefits, customizability can also limit exchange fungibility.)

Potentially lower margin requirements

OTC products with SXM may allow margins lower than the exchange for customers that are “non-financial end users” under CFTC margin rules. Because the CFTC requires strict qualifications to be eligible to trade OTC products, SXM has an exclusive understanding of our customer’s risk and is able to be more lenient on margin requirements. We estimate that our margin requirement is typically 80% of common exchange-mandated margin requirements.

Credit financing

SXM offers credit financing to customers based on their balance sheets. For certain qualified customers, SXM’s initial and variation margin thresholds, in some cases, can act as financing.

Equal or better liquidity

SXM’s liquidity in OTC products allows us to assist customers in a number of ways. For example, we can extend positions beyond the limits of the contract months available on exchange-traded products. We can also assist in unwinding a position, should an exit become necessary. In such cases, we honor the marked to market level, shown on daily statements, as the exit point.

To learn more about how these benefits may apply to your specific market view and risk management needs, please complete the contact form or contact one of our offices below. 


Meet the Team

Chicago, IL
230 South LaSalle Street
Suite 10-500
Chicago, IL 60604
Tel: +1 (312) 789-2516

Trading over-the-counter and exchange-traded derivatives is not suitable for all investors and involves substantial risk.  StoneX Markets, LLC (“SXM”), a subsidiary of StoneX Group Inc., is a member of the National Futures Association and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer.  SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM.  Any recipient of this material who wishes to express an interest in trading with SXM must first prequalify as an ECP, independently determine that derivatives are suitable for them and be accepted as a customer of SXM.  Trading over-the-counter (“OTC”) products or “swaps” involves substantial risk of loss. This is not an offer to buy or sell any derivative. This material does not constitute investment research and does not take into account the particular investment objectives, financial situations, or needs of individual clients or recipients of this material.  You are directed to seek independent investment and tax advice in connection with derivatives trading.

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