Central Counterparty Clearing
As a Central Counterparty ( CCP; also central counterparty or central counterparty ) is defined as an entity that occurs as a party between seller and buyer exchange traded and OTC derivatives trading some places. The CCP is then buyer to every seller and seller to every buyer.
The processes in which the CCP occurs as a party, are " Open Offer " ( immediate admission during the trading accounts ) or " novation " ( substitution of a transaction between two parties through two transactions with the CCP).
At first glance, the establishment of an anonymizing means place an unnecessary complication of the trade relations because of a business in an economic sense are two shops in the legal sense. The splitting is, however, both the anonymity of trade as well as the efficiency of netting arrangements.
The anonymity of trade is to ensure that, for example, in securities trading, the buyer can not be traced, who was the previous owner of the securities, as the contract partner of the purchaser is only the CCP. Nor can it identify the seller, who purchased the securities, as it also directly contracted only with the CCP.
The offsetting efficiency ( netting efficiency ) is further heightened as each trading participant is in contractual relations only with the CCP and therefore has only one contractor.
In addition, the CCP is the risk provisions. To reduce the performance risk of the CCP requires all trading participants a security deposit ( margin ) to allow in case of failure of a party a replacement. The calculation of the security deposit is based on the volatility of the security and the possible change of course. As methods are used, for example, employed in Germany Risk Based Margining (RBM ) or Standard Portfolio Analysis of Risk ( SPAN).
Since each trading participant the CCP as a contractor only, the counterparty risk ( Herstatt risk ) is reduced, and individual Reviews and credit lines for counterparties omitted. Trading participants deposit with the CCP security ( collateral ) to allow this a good rating and credit rating.
Buys A person on a stock exchange without CCP 10 quotas flour from person B, and to sell these afterwards to person C, as the flour must be ordered from person B to person A, and are then delivered from person A to person C.
On an exchange with CCP is under the same circumstances likewise a purchase agreement to sell as for person A. Since Person A but is now only in contractual relations with the CCP, the opposing commitments pick up, and there are so far no transaction costs. The actual delivery of the meal quotas are made directly from person to person B C.
Central Counter Parties now exist both on exchanges in the U.S. and in Europe. At the Frankfurt Stock Exchange since March 27, 2003, are satisfied Eurex Clearing AG, a subsidiary of the German Stock Exchange, the task of the CCP for all by the electronic trading system Xetra and the Frankfurt floor traded on the stock. Since then, Eurex Clearing AG has expanded this task on the areas of Exchange Traded Funds, Eurex, Eurex Bonds and Repos. For foreign exchange and certain derivatives transactions has existed since 2002, the system of Continuous Linked Settlement.
In the year 2006, the European Commodity Clearing AG ( ECC ), a CCP for energy- related transactions, a spin-off of the clearing business of the European Energy Exchange AG ( EEX) in an independent company. Until now, the ECC takes over this role in both exchange- made as well as OTC transactions registered across Europe and cooperates with 6 partner exchanges, 14 clearing members and more than 300 non-clearing members worldwide.
Under the new CCP releases the delivery obligations of exercises and assignments of the Eurex derivatives exchange are cleared with CCP functionalities and settled.