The execution of trades on a trading venue is followed by clearing for trades that require the intervention of a central counterparty (CCP). The settlement flows related to this activity are further outlined in the diagram below, which gives an illustration of trading activities carried out at trading venues, clearing activities performed by CCPs, and settlement processes executed by Clearstream Banking.
When a trade is executed, the CCP enters into the contract as an intermediary and becomes the buyer to each seller and the seller to each buyer, thereby reducing operational, credit and counterparty risk between trading members. In addition, the CCP records all the transactions and nets the trading positions for all trades requiring the intervention of the CCP. Thus, the CCP guarantees the settlement of netted positions for each clearing member.
The netted trade positions are cascaded at the end of the trading day to the (I)CSD for settlement. Settlement of clearable trades takes place in the (I)CSD clearing member account. A clearing member which does not maintain an account with Clearstream Banking will have to select the services of a settlement agent with an account with Clearstream Banking for settlement purposes.
For Clearstream Banking customers to fully utilise the CCP cleared flow services, a Power of Attorney should be granted to the relevant CCP.
Clearstream Banking currently supports the settlement of transactions cleared by the following CCPs:
For the list of trading venues and related markets connected to each CCP, please refer to the trading venue and CCP overview. The overview can be accessed in the attachments section below.
The CCP-related links and the attachment below provide further guidance on pre-requisites and key elements of the registration and execution process for CCPs.