Counterparty, central, CCP also central counterparty and in jargon often clearer (central counterparty, CCP)

Section 1 (1) sentence 2 no. 12 KWG in conjunction with Section 1 (31) KWG. 31 KWG defines a central counterparty as an entity that interposes itself, in one or more markets, between the counterparties, in order to – be available as a counterparty to each of them (becoming the buyer to every seller and the seller to every buyer), and – whose counterparty risk exposures to all participants in its systems are sufficiently collateralized on a daily basis, usually through margin agreements. – The CCP thus serves as a direct counterparty for buyers and sellers; it becomes a buyer to every seller and a seller to every buyer. As a result, the respective seller does not know to whom he is selling his financial instruments, nor does the buyer know from whom he is buying them. – The CCP increases the efficiency (cost effectiveness: the ratio of costs to performance) of exchange trading, because – each market participant has only one contracting party – the CCP can balance mutually related orders; this is also referred to as netting efficiency, and finally – there is no counterparty risk. – Such companies require a license and are subject to supervision by the German Federal Financial Supervisory Authority (BaFin). – In Germany, Eurex Clearing AG has been the central counterparty on the Frankfurt Stock Exchange for all exchange trades in German equities denominated in EUR held in collective custody since 2003. – When, in the wake of the financial crisis that followed the subprime crisis, buyers could no longer be found for many financial products in two-sided transactions, calls repeatedly emerged to establish corresponding CCPs for all market segments by law. – On August 12, 2013, the German Federal Financial Supervisory Authority published a detailed fact sheet on CCPs, which is available on the Authority’s website.- See Eurex Credit Clear, derivatives clearing obligation, derivatives information obligation, euro general collateral pooling, European Master Agreement, futures markets, general collateral repos, counterparty risk, trading, alternative, hub, margin call, margin coverage, marketability, margin call, margin agreement, option, collateral. – See BaFin Annual Report 2011, p. 68 f. (supervisory requirements), ECB Monthly Report January 2012, p. 67 (definition), p. 72 (statistical coverage issues), ECB Annual Report 2012, p. 145 (legal developments; oversight issues), and the respective ECB Annual Report, chapter “Oversight of payment systems and market infrastructures”), BaFin Annual Report 2012, p. 62 . (supervisory requirements for CCPs; issues still to be resolved), Financial Stability Report 2013, p. 96 et seq. (CCPs gaining in importance; issues relating to the recovery and resolution of CCPs; supervisory issues relating to CCPs as nodes in the financial system).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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