“Counterparty clearing house”

definition

Counterparty clearing houses are financial entities whose aim is to facilitate the derivatives and equities trading.

Counterparty clearing houses make transactions more stable by assuming the counterparty credit risk that would otherwise be carried by the two parties to a transaction. They act as intermediaries while also checking the finer points of a transaction.

Counterparty clearing houses hold two primary functions: clearing and settlement in addition to market monitoring and other duties.

In the clearing process, the clearing house clarifies what is to be required from each party to a transaction, and they then oversee the correct and timely transfer of securities and capital between the parties to complete the transaction in the settlement process.