Central Counterparty Clearing House - CCP
 |
Definition of 'Central Counterparty Clearing House - CCP'
An organization that exists in various European countries that helps facilitate trading done in European derivatives and equities markets. These clearing houses are often operated by the major banks in the country. The house's prime responsibility is to provide efficiency and stability to the financial markets that they operate in.
|
 |
Investopedia explains 'Central Counterparty Clearing House - CCP'
There are two main processes that are carried out by CCPs: clearing and settlement of market transactions. Clearing relates to identifying the obligations of both parties on either side of a transaction. Settlement occurs when the final transfer of securities and funds occur.
CCPs benefit both parties in a transaction because they bear most of the credit risk. If two individuals deal with one another, the buyer bears the credit risk of the seller, and vice versa. When a CCP is used the credit risk that is held against both buyer and seller is coming from the CCP, which in all likelihood is much less than in the previous situation.
|
-
Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
Read More »
-
Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
Read More »
-
For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
Read More »
|
|
