OTC derivative (Over-the-counter derivative)

Roles that need it

• Middle Office Analyst
• Trading Analyst
• Confirmations Analyst
• Legal Counsel
• Markets Sales Analyst

Skills it belongs to

• Derivatives and how they work
• Trade lifecycle

Related concepts

• ISDA Master AgreementThe ISDA Master Agreement is the standard contract published by the International Swaps and Derivatives Association under which two parties trade over-the-counter derivatives. It sets common terms, events of default and termination, and close-out netting, with a schedule for negotiated choices; each trade is then documented by a confirmation.
• Clearing obligationThe clearing obligation is the duty under the European Market Infrastructure Regulation (EMIR) for financial counterparties, and non-financial ones above clearing thresholds, to clear certain classes of over-the-counter (OTC) derivatives through a central counterparty. Classes in scope include the main interest rate swaps in major currencies and some index credit default swaps.
• EMIR (European Market Infrastructure Regulation)The European Market Infrastructure Regulation (EMIR), Regulation (EU) No 648/2012, sets EU rules for over-the-counter derivatives, central counterparties and trade repositories. It imposes clearing of standard derivatives, risk mitigation (confirmation, reconciliation, margin) for uncleared ones and reporting of all derivatives; EMIR 3 (2024/2987) added the active account requirement.
• NovationNovation is the replacement of an original contract with a new one in which a new party takes on the rights and obligations of one of the original parties. In clearing, a trade between two members is novated to the central counterparty, which becomes buyer to every seller and seller to every buyer.
• UPI (Unique product identifier)The unique product identifier (UPI) is a code defined by ISO 4914 that identifies an over-the-counter derivative product type and its reference data, such as asset class, instrument type and underlier. It is issued by the Derivatives Service Bureau and is required in reporting under the European Market Infrastructure Regulation (EMIR).

Sources

• Regulation (EU) No 648/2012 (EMIR), EUR-Lex (external site) accessed 31 Oct 2026
• ECB glossary (D) (external site) accessed 31 Oct 2026

Updated 31 Oct 2026.