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.
Glossar
Final Settlement Price
Valuation ⎊ The Final Settlement Price in cryptocurrency derivatives represents the agreed-upon value of the underlying asset at contract expiration, crucial for determining payouts in options and futures.
Clearing House
Role ⎊ The Clearing House acts as a central counterparty (CCP) in traditional and centralized crypto derivatives markets, interposing itself between buyers and sellers to guarantee the performance of the contract.
Role of a Clearing House
Role ⎊ The Role of a Clearing House, or Central Counterparty (CCP), is to interpose itself between the buyer and seller of a standardized derivative contract, becoming the legal counterparty to both sides of the transaction.