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Central Counterparty Clearing House (CCP)

Updated on July 16, 2024 , 4429 views

Central Counterparty Clearing House is the financial organisations which are operated by the major banks in the European countries. It is created with an objective to make the ease of trading in derivatives and equities that guarantees Efficiency and stability in the financial markets.

Central counterpartyclearing house

CCP performs on two primary functions as the intermediary in transactions they are as follows:

  • Clearing Process

Under the clearing process, the CCP becomes the counterparty of the buyer and the seller. It defines what is required from each party for a transaction to decrease counterparty risk and to ensure the settlement of the operation, even if one of the parties defaults.

  • Settlement Process

Under the settlement process, the CCP manages the right and timely transfer of securities and Capital between the parties to complete the transaction.

Once the transaction has been carried out between the two counterparties, then it is transferred to CCP. The CCP has the responsibilities of risk checking, clearing, settlement and general monitoring.

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Functions of Central Counterparty Clearing House

CCP works as privacy protection where it shields the associated trader’s identities from one another. It also protects the trading firms against the buyers and sellers those who are matched by an electronic order book. CCP removes the number of transactions that are settled because it assists in the steady operation and money moves efficiently among the traders.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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