Clearing House Initial and Variation Margins

Clearing House Initial and Variation Margins

In the final video, Abdulla discusses a prominent characteristic of exchanges in that they use clearing houses to act as a central counterparty for all transactions. A Clearing House guarantees the performance of futures and options contracts traded on its associated exchange. And secondly, to protect itself from the risk of default it operates a margining system.
Overview

Clearing Houses are firms that provide various services to derivatives and stock exchanges. Clearing Houses ‘clear’ trades on exchanges, in other words they handle most of the administrative processes of transactions, including confirmation and matching, post trade position keeping and oversee parts of the delivery and settlement processes.

Key learning objectives:

  • What is a clearing house, and what are their main functions?

  • What are the various types of margin applied to contracts?

  • What is the benefit of posting an initial margin?

  • What happens when a clearing member fails to meet any of its margin obligations?

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Summary
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Expert
Abdulla Javeri

Abdulla Javeri

Abdulla’s career in the financial markets started in 1990 when he entered the trading floor of the London International Financial Futures Exchange, LIFFE, and qualified as a pit trader in equity and equity index options. In 1996, Abdulla became a trainer for regulatory qualifications and then for non-exam courses, primarily covering all major financial products.

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