Clearing
  • A series of procedures to take up the settlement obligations by fixing the claims and obligations of transactions through netting and issuing settlement instruction to settlement organizations,
  • by becoming a seller to every buyer and a buyer to every seller (a legal creditor/debtor)* for transactions among securities (futures) companies
Central Counter-party, CCP

※ ‘Clearing’ includes trade confirmation, position fixing, assuming obligations, confirmation of securities and amount of settlement, notice of settlement details, confirmation of settlement finalization, etc.

  • In the case of derivatives products, the counterparties are usually changed when a new transaction is reversed by an offsetting transaction before maturity, which is a general case.
Central Counter-party, CCP
Classification Jan. 4th (A’s new selling transaction to B) Mar. 5th (A’s offsetting transaction from C)
A’s open interest 1 sell open interest 1 buy open interest
Netting Impossible if there is no CCP

→ If the multi-party relations are converted into two-party relations between a CCP and members, netting is possible between repeated selling and buying transactions during a day or between initial and offsetting transactions on different dates.


< Netting among multiple parties via CCP >
Netting among multiple parties via CCP
Settlement
  • Termination of transactions by fulfilling claims and obligations between the CCP and securities (futures) houses, i.e. the act of receiving and paying securities and funds. The claims and obligations are fixed via clearing by the CCP.