What Is the Difference between a Clearing Member and a Non-Clearing Member in a CCP Structure?

A clearing member is a financial institution that has a direct relationship with the Central Clearing Counterparty (CCP). They are responsible for posting their own margin and also for clearing trades on behalf of their clients.

A non-clearing member is a firm that does not have a direct relationship with the CCP and must clear its trades through a clearing member. This tiered structure allows smaller firms to access the benefits of central clearing without having to meet the stringent financial and operational requirements of becoming a direct clearing member.