What is the 'Canadian Derivatives Clearing Corporation (CDCC)'

The Canadian Derivatives Clearing Corporation (CDCC) is the central clearing counterparty for exchange-traded derivative products, such as options and futures, in Canada. The CDCC) also acts as the clearinghouse for a growing range of over-the-counter financial instruments including fixed income and foreign exchange securities. CDCC is a wholly-owned subsidiary of the Montreal Exchange and operates as a subsidiary of Bourse de Montreal, Inc.

BREAKING DOWN 'Canadian Derivatives Clearing Corporation (CDCC)'

The Canadian Derivatives Clearing Corporation (CDCC), initially called the Trans Canada Options (TCO), was established in 1977 through the merger of the Montreal and Toronto options clearinghouses. TCO changed its name to Canadian Derivatives Clearing Corporation in 1996. 

By 2000, the CDCC became entirely owned by the Montreal Exchange. Eight years later, the merger of the Montreal Exchange and the TSX Group changed the ownership of the CDCC to the TSX Group. Under this leadership, the Canadian Derivatives Clearing Corporation would expand its operations to include the clearing of fixed income transactions in 2012. 

The CDCC states it is the only integrated central clearing counterparty in North America which clears and settles not only futures and options but contracts for options on futures as well. The company has over 35 years of being Canada's central clearing counterparty and guarantor of derivative products which are exchange-rated. Furthermore, the CDCC includes more than 30 clearing members.

Canada ranks 9th in the Heritage Foundation’s 2018 Index of Economic Freedom. Having access to corporations such as the Canadian Derivative Clearing Corporation helps to keep it on the mostly free list. 

What the Canadian Derivatives Clearing Corp. Does

A counterparty, or clearinghouse, acts to guarantee transactions which take place between buyers and sellers. The most frequent association of a clearinghouse is with the futures market. All trades must transfer through a clearinghouse at the end of every trading session. Members are required to deposit enough funds to cover the member’s balance.

The purpose of a clearinghouse is to stabilize the market and expedite efficiencies. This is especially necessary when dealing with the futures market as the transactions are complex and require a stable intermediary.

There are two dominant clearinghouses in the United States, the New York Stock Exchange (NYSE), and the NASDAQ. In addition to the CDCC Canada also has the CDS Clearing Depository Services Inc, The CLS Bank, and the LCH-Clearnet Limited’s SwapClear Service.

  1. Montreal Exchange

    The Montreal Exchange is a Canadian derivatives exchange for ...
  2. Replacement Risk

    Replacement risk is a risk that may be present in over the counter ...
  3. Clearing House

    Clearing houses are responsible for clearing and settling trades, ...
  4. New York Clearing House Association ...

    The New York Clearing House Association organization was established ...
  5. Underlying Security

    An underlying security is a stock, bond, currency, or commodity ...
  6. Derivative

    A derivative is a security with a price that is dependent upon ...
Related Articles
  1. Insights

    Why Are Safe Haven Assets Disappearing?

    The push for safer trading is sharply reducing the supply of safe haven assets, experts say.
  2. Trading

    Derivatives 101

    Learn how to use derivatives to hedge, speculate or increase leverage in an investment portfolio.
  3. Trading

    An Overview Of Futures, Derivatives, and Liquidity

    Gain an understanding of futures and derivatives, and how these instruments are meant to mitigate market risk.
  4. Trading

    Examples Of Exchange-Traded Derivatives

    We look at some of the most common exchange-traded derivatives.
  5. Investing

    Toronto Stock Exchange: Safest Investment In The World?

    Canada, one of the wealthiest countries, is also one of the safest places to invest.
  6. Personal Finance

    4 Derivative Sales Career Paths

    Discover some sell-side career paths of derivatives markets that offer some unique opportunities for career seekers in this article.
  7. Trading

    Are Derivatives A Disaster Waiting To Happen?

    They've contributed to some major market scandals, but these instruments aren't all bad.
  8. Tech

    Canada Banks Ban Users From Buying Cryptocurrency

    Bank of Montreal has become the latest Canadian bank to ban cryptocurrency transactions.
  9. Investing

    History Of The Toronto Stock Exchange

    Find out how the third-largest stock exchange in North America came to be.
  10. Taxes

    Benefits Of A Dependent Care FSA

    Here's how your Dependent Care FSA works and how you can use it to your advantage as a parent with dependents.
  1. What is the difference between derivatives and options?

    A derivative is a financial contract that gets its value from an underlying asset. Options offer one type of common derivative. Read Answer >>
  2. Are ETFs considered derivatives?

    Learn why most exchange-traded funds (ETFs) are not considered derivative securities and the special circumstances when this ... Read Answer >>
  3. What's Required for a Stock to Trade as an Option?

    Learn the four criteria companies must meet before options on their stock can be traded. Read Answer >>
  4. What is the difference between derivatives and swaps?

    Swaps comprise just one type of the broader asset class called derivatives. Read Answer >>
Trading Center