What Role Does the Clearing House Play in the Settlement of Cash-Settled Futures?

The clearing house acts as the central counterparty to every trade, guaranteeing the financial performance of both the buyer and the seller. In cash settlement, the clearing house calculates the final cash obligations based on the final settlement price.

It manages the transfer of funds, ensuring that the net difference is paid by the party with a loss and received by the party with a gain, thereby mitigating counterparty risk.