Central Counterparty Clearing
- Central Counterparty Clearing
Central Counterparty Clearing (CCC) is a process by which financial transactions in equities are cleared by a single (i.e., "central") counterparty. Please see Clearing (finance) for general information about clearing. This article contains specifics about the process as it applies to non-centrally cleared equity markets in the U.S.
In the United States, there is a separation between the Clearing Broker and the Depository. This means that there will be multiple clearing brokers that have to reconcile shares and money against other clearing brokers. It also means that the clearing brokers bear the risk of default on the leg of the transaction that they are servicing. Contrast this with the options market with its Options Clearing Corporation, which is a true central clearing counterparty and which bears all default risk (by distributing it evenly among its members).
To better understand Central Counterparty Clearing (CCC), a relatively new process, in the U.S. equity markets, first consider the lifecycle of a trade before Central Counterparty Clearing:
# Orders are routed from the investment firms (one is a buyer, the other is a seller) to their respective Executing Brokers.
# The Executing Brokers send the orders to the appropriate Marketplace for the security being traded. The Marketplaces respond with executions ("fills").
# The Executing Brokers send the fills to the Clearing Broker that was designated by the investment firms. Many Executing Brokers are themselves Clearing Brokers, a term which is called "self-clearing".
# The Marketplace(s) and the Clearing Brokers compare their shares/money to make sure that they match. This is referred to as "Street-Side matching".
# The Investment Managers inform their respective Custodians what they should expect to receive/deliver from the Clearing Brokers, and the Custodians perform this comparison. This is referred to as "Customer-Side matching". This occurs the day of the trade (T+0).
On Settlement Date (which is usually up to 3 days after Trade Date, the date when the actual trade occurred), the Clearing Brokers will deliver/receive the match amount of shares/money to settle the trade with both Investment firms.
External links
Firms providing Central Counterparty Clearing (may be incomplete):
* [http://www.fastesp.com Electronic Securities Processing (ESP)]
* [http://www.unx.com UNX]
* [http://www.firefly.com Firefly]
Other links:
* [http://tabbgroup.com/PublicationDetail.aspx?PublicationID=271 Independent report by the Tabb Group, which they charge for]
Wikimedia Foundation.
2010.
Look at other dictionaries:
Central Counterparty Clearing House - CCP — An organization that exists in various European countries that helps facilitate trading done in European derivatives and equities markets. These clearing houses are often operated by the major banks in the country. The house s prime… … Investment dictionary
Central Counterparty — Als Central Counterparty (CCP; auch Zentraler Kontrahent oder Zentrale Gegenpartei) bezeichnet man ein Rechtssubjekt, das an Börsen und manchen OTC Derivaten Handelsplätzen als Vertragspartei zwischen Verkäufer und Käufer tritt. Die CCP ist dann… … Deutsch Wikipedia
central counterparty — (CCP) International Also known as clearing house. An entity that functions as a centralised repository for trades, typically in derivatives, which provides a guarantee that the trade will be fulfilled so that the parties engaging in derivatives… … Law dictionary
Central counterparty — Als Central Counterparty (CCP; auch Zentraler Kontrahent oder Zentrale Gegenpartei) bezeichnet man ein Rechtssubjekt, das an Börsen als Vertragspartei zwischen Verkäufer und Käufer tritt. Die CCP ist dann Käufer für jeden Verkäufer, und Verkäufer … Deutsch Wikipedia
central counterparty — ( CCP) Euroclear Clearing and Settlement glossary An entity that is the buyer to every seller and the seller to every buyer of a specified set of contracts/obligation ( e.g. those executed on a particular exchange). Euroclear Clearing and… … Financial and business terms
Clearing (finance) — In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying… … Wikipedia
Clearing — Unter Clearing wird das Feststellen gegenseitiger Forderungen, Verbindlichkeiten und Lieferverpflichtungen verstanden.[1] Der Clearingprozess[2] beinhaltet die Übermittlung, Abstimmung und in einigen Fällen Bestätigung von Abschlüssen sowie… … Deutsch Wikipedia
central clearing counterparty — (CCP) USA See clearinghouse, CCP. Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010 … Law dictionary
Code of Conduct for Clearing and Settlement — The European Code of Conduct for Clearing and Settlement (Code of Conduct) is an initiative of European securities exchanges, clearing houses and central securities depositories to set a uniform rules for trading, clearing, settlement and custody … Wikipedia
Options Clearing Corporation - OCC — An organization that acts as both the issuer and guarantor for option and futures contracts. The Options Clearing Corporation operates under the jurisdiction of the U.S. Securities and Exchange Commission (SEC) and the Commodities Futures Trading … Investment dictionary
