The initial margin can be seen as a good faith guarantee that the trader can afford to maintain the trade until it is closed. These funds are held by the clearing company, but in the merchant`s account, and cannot be used for other trades. The intention is to compensate for any losses that the trader may suffer in the transaction. The first method of payment required by the compensation was cheques, as the cheques had to be returned to the issuing bank for payment. Each financial contract has a designated clearing house or internal clearing service to perform this function. Systemically important payment systems (SPIS) are payment systems that have the characteristic that a failure of these systems could jeopardize the functioning of the economy as a whole. In general, these are the main gross or real-time financial compensation systems of different countries, but in the case of Europe, there are some pan-European payment systems. Target2 is a pan-European SPIs that deals with large interbank payments. Step2, managed by the Euro Banking Association, is a large European-wide retail payment clearing system, which has the potential to become a SPIS. In the United States, the Federal Reserve system is a SPIS. This risk is generally referred to as transaction risk and avoided by the participation of a clearing house. Suppose a merchant buys a futures contract. By that date, the clearing house had already set the initial margin and maintenance margin requirements.
In order to avoid any doubt, such a compensation agreement must provide, among other things, compensation by LCH SA when Rule 2501A/3, paragraph i, is not applicable. The clearing house enters the image after a buyer and seller have done a trade. Its role is to execute the steps that close the transaction and, therefore, validate it. As an intermediary, the clearing house provides the security and efficiency essential to the stability of a financial market. In this example, the clearing house ensured that there was enough money in the account to cover the losses that the account holder may suffer in the trade. Once the trade closes, the remaining margina funds will be released from the distributor. Clearing houses act as a third party for futures and options contracts, as buyers for each seller of countervailing members and as a seller for each compensating member buyer. Exchanges such as the New York Stock Exchange (NYSE) have clearing divisions that ensure that an equity trader has enough money in an account to finance the trades placed. The clearing industry acts as an intermediary and thus facilitates the smooth transfer of shares and money. Bekleme odasa bo-al-yor.
– The waiting room is becoming clearer. In some specialized financial markets, clearing was already separate from trading.