Central counterparties (CCPs) are structures that help
facilitate the clearing and settlement process in financial
markets. They have long been utilized in the derivatives
markets, more recently have been adopted in
cash securities markets, and currently are experiencing
a growing interest in a further expansion of their use.
Typical examples of CCPs in the U.S. include the clearinghouses
for the derivatives markets in Chicago—
the Chicago Mercantile Exchange Clearing House,
the Options Clearing Corporation, and the Clearing
Corporation.1 Examples in the European Union include
LCH.Clearnet and Eurex Clearing. A more comprehensive,
but non-exhaustive, list of U.S. and European
central counterparties, with characteristics of each arrangement,
is included in Bliss and Papathanassiou
(2006) and reproduced in appendix 1.