An Exchange is a trading organization which matches bids and offers on standardized contracts to form trades. Unlike a Broker the Exchange acts as the counterparty for the trades, and trading is anonymous

Detail

An Exchange offers standardized contracts, normally

• Spots - Forward trades for Prompt delivery (today, tomorrow - day ahead, and sometimes for the forthcoming weekend
• Futures - Contracts for future delivery, usually weeks, months, quarters, seasons and years, in standardized volumes or rates (e.g. therms per day, Megawatts, Tonnes)
• Swaps - Financially settled Contracts in the future, usually between a fixed price and an index, or between two indexes
• Options - Options on standardized contracts for future delivery, offered at a trade price or premium, with a range of strike prices, puts and calls, expiry dates and delivery dates

Spots are delivered and settled in a matter of days - settlement occurring through movement of funds held in a cash account

Futures may be physically or financially settled - credit risk is reduced through daily margining. Physically settled Futures are either converted to equivalent Spots at expiry, or alternative physical delivery is agreed between partners

Swaps are always financially settled through margining

Options, like OTC options, have a defined expiry date, at which time they or may not be exercised, usually into the corresponding exchange traded Futures