Central Counterparty (CCP)
A central counterparty interposes itself between clearing members to net obligations, collect margin, complete settlement, and manage member defaults.
Central-counterparty risk management connects trade acceptance, netting, margin, collateral, default funds, and member-default procedures.
Central-counterparty risk management governs what happens after an eligible trade is accepted for clearing and what resources are available if a clearing member fails. A central counterparty becomes counterparty to clearing members, nets eligible obligations, collects margin, and applies default procedures under its rulebook.
The default fund is only one layer of this system. Member standards, variation margin, initial margin, collateral controls, CCP capital, liquidity arrangements, and recovery tools serve different purposes and should not be collapsed into a generic guarantee.
| Stage | Main question | Evidence to review |
|---|---|---|
| Trade acceptance | When does the CCP become legally bound? | Rulebook, product eligibility, novation or open-offer terms |
| Daily risk management | How are current and potential exposures covered? | Valuation, variation margin, initial margin, collateral, haircuts |
| Settlement | Which cash, security, or delivery obligations must complete? | Settlement system, finality rules, currency, timetable |
| Member default | How will the CCP return to a matched book? | Hedging, auction, transfer, closeout, and porting procedures |
| Loss allocation | Which resources absorb losses and in what order? | Defaulter resources, CCP capital, mutualized fund, assessments |
| Recovery or resolution | What happens beyond ordinary default resources? | Recovery plan, rulebook tools, resolution authority |
OCC illustrates U.S. listed-options clearing, including exercise and assignment. LCH illustrates why the legal clearinghouse and service must be identified in multi-asset, cross-border clearing.
These pages provide general market-structure education. Current CCP rules, product specifications, and regulatory requirements control actual clearing obligations.
Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.
A central counterparty interposes itself between clearing members to net obligations, collect margin, complete settlement, and manage member defaults.
A CCP default fund is a prefunded pool contributed by clearing members to absorb defined default losses that exceed a defaulter's own margin and resources.
LCH is an LSEG clearing group whose LCH Ltd and LCH SA central counterparties clear eligible rates, foreign exchange, fixed-income, equity, credit, and other products.
The Options Clearing Corporation is the central counterparty that clears U.S. exchange-listed options and manages settlement, margin, exercise, assignment, and member-default risk.