The netting and settlement of claims and liabilities arising from securities and derivatives transactions

Clearing is typically performed by a central institution, the so-called clearinghouse. The clearinghouse determines the bilateral net debt of buyers and sellers involved in exchange transactions, and, at the end of the trading day, provides its members with a summary of their transactions, as well as the resulting net claims and liabilities. In the case of derivatives transactions, the clearinghouse will inform its members of the funds they must put up to meet their margin requirements.

To become a member of a clearinghouse, an institution must have a license, a securities account and a money settlement account with the clearinghouse. Moreover, it must furnish material, organisational and financial collateral as specified in the licensing agreements.

In its capacity as the central settlement institution for stock exchange transactions, the clearinghouse functions as a counterparty to trades, thereby guaranteeing the proper execution of trades as well as the settlement of the net debt. Eurex Clearing AG is the clearinghouse affiliated with Deutsche Börse AG.

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