What Is the Role of a Clearing House in the Cash Settlement Process?

The clearing house acts as a central counterparty to every trade, guaranteeing the performance of the contract. In cash settlement, the clearing house calculates the final settlement price and determines the net cash amount owed to or by each clearing member.

It manages the flow of funds, transferring cash from those who lost money on the contract to those who gained, ensuring the integrity and finality of the settlement process.