What Is the Function of a Central Clearing House?
A central clearing house acts as an intermediary between buyers and sellers in a trade, becoming the counterparty to both sides. Its primary function is to guarantee the settlement of the trade, thereby eliminating counterparty risk between the original buyer and seller.
It manages risk through collateral requirements, netting, and margining.
Glossar
Central Clearing
Mitigation ⎊ Central clearing, within cryptocurrency derivatives and options, functions as a financial intermediary establishing itself between counterparties to reduce systemic risk.
Central Clearing House
Mitigation ⎊ Central clearing houses, within cryptocurrency derivatives and broader financial markets, function as intermediaries designed to reduce systemic risk by mutualizing credit exposures.