What Is the Difference between a CCP and a Settlement Institution?
A Central Clearing Counterparty (CCP) manages counterparty credit risk by guaranteeing the performance of the trade (novation) and manages margin/collateral. A Settlement Institution (like a central bank or a commercial settlement system) handles the final transfer of funds and assets.
While they work together, the CCP is focused on risk management, and the Settlement Institution is focused on the mechanical transfer of value.
Glossar
Counterparty Credit Risk
Exposure ⎊ Counterparty credit risk in cryptocurrency derivatives arises from the potential for a participant to default on contractual obligations, impacting net market value.
Central Clearing Counterparty
Framework ⎊ The Central Clearing Counterparty (CCP) within cryptocurrency derivatives, options trading, and broader financial derivatives represents a critical infrastructural element designed to mitigate counterparty credit risk.