Introduction In the financial context, derivative refers to a contract between a buyer and a seller, which takes place today and regards a transaction that will be fulfilled at a future date (Ross, Westerfield & Jordan, 2002). It is a contract stating the conditions, consequential values of the concerned variables, dates, and amounts under which payments are to be made between the concerned entities. In this context, it is a contract signed in the financial markets for derivatives (Citi Bank, 2012). This paper describes the absolute global size, growth, and reasons for volatility in the derivative market. Derivatives traded can be divided into two vital categories. This includes exchange-traded derivatives and derivatives traded over-the-counter (OTC). Nonetheless, derivatives are different from securities. They are mainly used for protection and management of risks and are for investment purposes. They provide varying types of protection from risk and enable modern and innovative methods for investing. Usually, derivatives markets operate under a regulatory regime to ensure efficient operations, safety, and innovations. Derivatives are used to trade future risks. They do this by eliminating uncertainties in the market through exchange of market risks, normally referred as hedging (Ross, Westerfield & Jordan, 2002). Derivatives are also used as intangible investments. They are an alternative to direct investments, assets, and properties. It is also used by investors who wish to have total transaction costs that are low compared to direct investments. Finally, derivatives are used when there is need for fast innovation of products. Contracts can be engaged and structured faster to meet specific market requirements. The Size of the Derivatives Markets Derivatives markets are large and have grown faster in the last 20 years. According to the international swaps and derivatives association (ISDA), the international value of all derivative transactions worldwide was 587 trillion dollars in 2007 (ISDA, 2009). This is larger than the combined GDP for the entire world in 2008, which was only USD 60 trillion. The derivative market is so large that it has an influence in the entire world’s financial structure. The influence of the derivative market on the world’s financial system was felt in 2008 during the global financial crises. Transactions in the derivative markets are mostly for speculation instead of hedging. Liquidity in the market is usually from speculators, who in doing so, transfer risks. In order to know the size of the market, the value of credit that swapped in 2007 is comparable to the value of household real estate in the same year. The total default credit swaps in 2007 were USD 62.2 trillion while worldwide household real estate total was a mere USD 19.9 trillion (ISDA, 2009). Over-the-Counter segment of the derivatives market usually operates without considering national boundaries and thus is accessible to customers globally, meaning that the market is very large. The participants in the market are usually able to connect and trade distantly and with ease as long as there are no market restrictions that are likely to create trading barriers. The derivatives market is truly worldwide and enormous when taken as a whole. Today, for exa