What Is the Concept of "Novation" in a Clearinghouse? ⎊ Path

What Is the Concept of “Novation” in a Clearinghouse?

Novation is the legal process where, upon a trade being submitted to a clearing house, the clearing house interposes itself as the central counterparty (CCP). It becomes the legal counterparty to both the original buyer and the original seller, extinguishing the original contract and creating two new ones.

This is what allows the CCP to guarantee the trade's performance.

What Is a “Novation” and How Does It Relate to a Clearinghouse?

What Is Novation in the Context of a Clearinghouse?

How Does the Concept of “Novation” Apply to the Clearing House?

What Is ‘Novation’ and How Does It Reduce Counterparty Risk?

What Is “Novation” in the Context of a Clearing House?

What Is the Role of a Clearing House in Mitigating Counterparty Risk in Derivatives?

How Is the Process of ‘Novation’ Central to the Clearing House’s Role?

What Is the Function of a Clearing House in a Traditional Options Exchange?