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What is a negotiable security and how are they related to derivatives?
negotiability is a legal concept that permits free transfer of a security without the requirement of prior consent of the issuer.  that means the issuer must pay the current holder of the security, irrespective of who he is.  negotiability also protects a good faith buyer of the instrument from adverse ownership claims of purported prior holders of the instrument.  it is not related to "negotiating" the price or whatnot.  A negotiable security means the current owner does not have to be concerned about acquiring the asset via a bad chain of title b/c he can always assert that he is a "holder in due course" defense against such claims, and have absolute security in his ownership right over the asset.  securities and derivatives are different.  securities are transferrable instruments representing a direct claim on the issuer for the value of the security, whether debt or equity ownership.  derivatives are bilateral contracts, which can only be entered into with the consent of both parties, and can only be transferred by such consent.  derivatives represent a claim against the parties of to the derivative that depends on some economic reference which is outside of the financial condition of the two parties to the contract, such as interest rates, FX rates, commodity prices, etc.