CFTC Glossary

A Guide to the Language of the Futures Industry


Daily Price Limit: The maximum price advance or decline from the previous day's settlement price permitted during one trading session, as fixed by the rules of an exchange.

Day Ahead: See Next Day.

Day Order: An order that expires automatically at the end of each day's trading session. There may be a day order with time contingency. For example, an "off at a specific time" order is an order that remains in force until the specified time during the session is reached. At such time, the order is automatically canceled.

Day Trader: A trader, often a person with exchange trading privileges, who takes positions and then offsets them during the same trading session prior to the close of trading.

DCM: See Designated Contract Market.

Dealer  An individual or firm that acts as a market maker in an instrument such as a security or foreign currency.

Dealer/Merchant (AD): A large trader that declares itself a “Dealer/Merchant” on CFTC Form 40,which provides as examples “wholesaler, exporter/importer, shipper, grain elevator operator, crude oil marketer.”

Deck: The orders for purchase or sale of futures and option contracts held by a floor broker. Also referred to as an order book.

Declaration Date: See Expiration Date.

Declaration (of Options): See Exercise.

Default: Failure to perform on a futures contract as required by exchange rules, such as failure to meet a margin call, or to make or take delivery.

Default Option: See Credit Default Option.

Deferred Futures: See Back Months.

Deliverable Grades: See Contract Grades.

Deliverable Stocks: Stocks of commodities located in exchange-approved storage for which receipts may be used in making delivery on futures contracts. In the cotton trade, the term refers to cotton certified for delivery. Also see Certificated or Certified Stocks.

Deliverable Supply: The total supply of a commodity that meets the delivery specifications of a futures contract. See Economically Deliverable Supply.

Delivery: The tender and receipt of the actual commodity, the cash value of the commodity, or of a delivery instrument covering the commodity (e.g., warehouse receipts or shipping certificates), used to settle a futures contract. See Notice of Delivery, Delivery Notice.

Delivery, Current: Deliveries being made during a present month. Sometimes current delivery is used as a synonym for nearby delivery.

Delivery Date: The date on which the commodity or instrument of delivery must be delivered to fulfill the terms of a contract.

Delivery Instrument: A document used to effect delivery on a futures contract, such as a warehouse receipt or shipping certificate.

Delivery Month: The specified month within which a futures contract matures and can be settled by delivery or the specified month in which the delivery period begins.

Delivery, Nearby: The nearest traded month, the front month. In plural form, one of the nearer trading months.

Delivery Notice: The written notice given by the seller of his intention to make delivery against an open short futures position on a particular date. This notice, delivered through the clearing organization, is separate and distinct from the warehouse receipt or other instrument that will be used to transfer title. Also called Notice of Intent to Deliver or Notice of Delivery.

Delivery Option: A provision of a futures contract that provides the short with flexibility in regard to timing, location, quantity, or quality in the delivery process.

Delivery Point: A location designated by a commodity exchange where stocks of a commodity represented by a futures contract may be delivered in fulfillment of the contract. Also called Location.

Delivery Price: The price fixed by the clearing organization at which deliveries on futures are invoiced—generally the price at which the futures contract is settled when deliveries are made. Also called Invoice Price.

Delta: The expected change in an option's price given a one-unit change in the price of the underlying futures contract or physical commodity. For example, an option with a delta of 0.5 would change $.50 when the underlying commodity moves $1.00.

Delta Margining or Delta-Based Margining: An option margining system used by some exchanges that equates the changes in option premiums with the changes in the price of the underlying futures contract to determine risk factors upon which to base the margin requirements.

Delta Neutral: Refers to a position involving options that is designed to have an overall delta of zero.

Deposit: See Initial Margin.

Depository Receipt: See Vault Receipt.

Derivative: A financial instrument, traded on or off an exchange, the price of which is directly dependent upon (i.e., "derived from") the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement (e.g., the movement over time of the Consumer Price Index or freight rates). They are used to hedge risk or to exchange a floating rate of return for fixed rate of return. Derivatives include futures, options, and swaps. For example, futures contracts are derivatives of the physical contract and options on futures are derivatives of futures contracts.

Derivatives Clearing Organization: A clearing organization or similar entity that, in respect to a contract (1) enables each party to the contract to substitute, through novation or otherwise, the credit of the derivatives clearing organization for the credit of the parties; (2) arranges or provides, on a multilateral basis, for the settlement or netting of obligations resulting from such contracts; or (3) otherwise provides clearing services or arrangements that mutualize or transfer among participants in the derivatives clearing organization the credit risk arising from such contracts.

Derivatives Transaction Execution Facility (DTEF): A board of trade that is registered with the CFTC as a DTEF. A DTEF is subject to fewer regulatory requirements than a contract market. To qualify as a DTEF, an exchange can only trade certain commodities (including excluded commodities and other commodities with very high levels of deliverable supply) and generally must exclude retail participants (retail participants may trade on DTEFs through futures commission merchants with adjusted net capital of at least $20 million or registered commodity trading advisors that direct trading for accounts containing total assets of at least $25 million). 

Designated Contract Market: See Contract Market.

Designated Self-Regulatory Organization (DSRO): Self-regulatory organizations (i.e., the commodity exchanges and registered futures associations) must enforce minimum financial and reporting requirements for their members, among other responsibilities outlined in the CFTC's regulations. When a futures commission merchant (FCM) is a member of more than one SRO, the SROs may decide among themselves which of them will assume primary responsibility for these regulatory duties and, upon approval of the plan by the Commission, be appointed the "designated self-regulatory organization" for that FCM.

Diagonal Spread: A spread between two call options or two put options with different strike prices and different expiration dates. See Horizontal Spread, Vertical Spread.

Differentials: The discount (premium) allowed for grades or locations of a commodity lower (higher) than the par of basis grade or location specified in the futures contact. See Allowances.

Digital Option: See Binary Option.

Directional Trading: Trading strategies designed to speculate on the direction of the underlying market, especially in contrast to volatility trading.

Disclosure Document: A statement that must be provided to prospective customers that describes trading strategy, potential risk, commissions, fees, performance, and other relevant information.

Discount: (1) The amount a price would be reduced to purchase a commodity of lesser grade; ( 2) sometimes used to refer to the price differences between futures of different delivery months, as in the phrase "July at a discount to May," indicating that the price for the July futures is lower than that of May.

Discretionary Account: An arrangement by which the holder of an account gives written power of attorney to someone else, often a commodity trading advisor, to buy and sell without prior approval of the holder; often referred to as a "managed account" or controlled account.

DRT ("Disregard Tape") or Not-Held Order: Absent any restrictions, a DRT (Not-Held Order) means any order giving the floor broker complete discretion over price and time in execution of an order, including discretion to execute all, some, or none of this order.

Distant or Deferred Months: See Back Month.

Dominant Future: That future having the largest amount of open interest.

Double Hedging: As used by the CFTC, it implies a situation where a trader holds a long position in the futures market in excess of the speculative position limit as an offset to a fixed price sale, even though the trader has an ample supply of the commodity on hand to fill all sales commitments.

DSRO: See Designated Self-Regulatory Organization.

DTEF: See Derivatives Transaction Execution Facility.

Dual Trading: Dual trading occurs when: (1) a floor broker executes customer orders and, on the same day, trades for his own account or an account in which he has an interest; or (2) a futures commission merchant carries customer accounts and also trades or permits its employees to trade in accounts in which it has a proprietary interest, also on the same trading day.

Dutch Auction: An auction of a debt instrument (such as a Treasury note) in which all successful bidders receive the same yield (the lowest yield that results in the sale of the entire amount to be issued).

Duration: A measure of a bond's price sensitivity to changes in interest rates.