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Define “Novation” in the Context of a Clearing House

The legal process where the clearing house becomes the central counterparty, replacing the original parties.
Greeks.Live24.11.25

Define “Novation” in the Context of a Clearing House.

Novation is the legal process where the clearing house interposes itself as the buyer to every seller and the seller to every buyer. Upon trade execution, the original contract between the two parties is legally replaced by two new contracts: one between the buyer and the clearing house, and one between the seller and the clearing house.

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