CCPs (central counterparties) are key components of financial markets, stepping in between participants to act as the buyer to every seller and the seller to every buyer, and playing a central role in processing financial transactions and managing exposures to diverse risks inherent in those transactions. CCPs centralise the handling of transactions and positions of counterparties, honour the obligations created by the transactions, and require adequate collateral from their members as margin and as contributions to default funds.
CCPs clear transactions executed in the organised trading, including regulated market and alternative trading systems as well as over-the-counter (OTC). CCPs can be authorised to clear several product classes, including listed and OTC financial and commodity derivatives, cash equities, bonds and other products such as repos.
In order to ensure the proper management of the counterparty risk, CCPs are obligated to establish the risk management system which should comply with EMIR.
