A Central Counterparty (CCP) is a financial market infrastructure organisation that interposes itself between counterparties to contracts traded in financial markets, becoming the buyer to every seller and the seller to every buyer. This reduces counterparty risk, ensuring the smooth settlement of transactions.
Examples of CCP’s include:
LCH Ltd (London Clearing House) – UK
Eurex Clearing – Germany
DTCC (Depository Trust & Clearing Corporation) – USA
JSCC (Japan Securities Clearing Corporation) – Japan
ASX Clear – Australia
HKEX OTC Clearing – Hong Kong
These CCPs play a critical role in mitigating counterparty risk and ensuring financial market stability.