Do OTC Crypto Derivatives Typically Use a Clearing House?
No, OTC crypto derivatives, by their nature, are bilateral agreements between two parties and do not involve a central clearing house. They rely on the creditworthiness of the counterparties and may use collateral or a Credit Support Annex (CSA) to mitigate risk.
Some centralized crypto exchanges offer "exchange-cleared" OTC, but this is a hybrid model.
Glossar
Credit Support Annex
Documentation ⎊ This legal supplement, typically attached to an ISDA Master Agreement, specifies the terms under which collateral is exchanged between counterparties to mitigate credit exposure in derivative transactions.
Bilateral Agreements
Agreement ⎊ Bilateral Agreements in derivatives trading refer to private contracts established directly between two principal counterparties without the intermediation of a central exchange or clearinghouse.
OTC Crypto Derivatives
Structure ⎊ OTC crypto derivatives represent privately negotiated agreements for the exchange of cryptocurrency-based risk, differing from standardized exchange-traded contracts through customization and counterparty credit exposure.