The following Financial Services practice note provides comprehensive and up to date legal information covering:
BREXIT: As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. This has an impact on this Practice Note. For guidance, see Practice Note: Brexit—impact on finance transactions—Key issues for derivatives transactions and Brexit—impact on finance transactions—Derivatives and debt capital markets transactions—key SIs.
Clearing is a process which eliminates the normal risk that a party to a derivatives transaction will default.
The main parties involved in the clearing process are:
a financial institution known as a clearing house, a central counterparty or a CCP, and
other financial institutions, usually banks or brokers, which enter into a clearing agreement with the clearing house—these institutions are known as clearing members of the clearing house or simply clearing firms
In cleared transactions:
all transactions are entered into by clearing members, which may do this for their own accounts or for the accounts of their clients, and
the clearing house interposes itself between the clearing members who have entered into the transaction, becoming a party to every transaction—each party therefore is exposed to the risk of the clearing house but not to the risk of the other party
The way in which the clearing house is interposed between
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