How Does a Central Counterparty (CCP) Traditionally Handle Netting, and How Does Blockchain Disrupt This? ▴ Learn

How Does a Central Counterparty (CCP) Traditionally Handle Netting, and How Does Blockchain Disrupt This?

A CCP acts as the buyer to every seller and the seller to every buyer, becoming the sole counterparty to all transactions. It uses multilateral netting to consolidate all bilateral obligations into a single net payment obligation for each member.

Blockchain disrupts this by allowing direct, peer-to-peer (P2P) netting among participants on a shared ledger without the need for the CCP as an intermediary. The shared ledger automates the consolidation, reducing the CCP's role to potentially just a validator or oversight body.

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