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What Is the Function of a Central Clearing House?

A central clearing house guarantees trade settlement by becoming the counterparty to both sides, eliminating bilateral counterparty risk.
Greeks.Live12.11.25

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.

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