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Introduction
The Clearing Corporation is a Delaware corporation owned by
17 stockholders, many of whom represent the world-wide derivatives
marketplace participants and market makers, and is the only
active independent futures clearinghouse in the world.
In
1925, The Clearing Corporation ("CCorp"), then named
The Board of Trade Clearing Corporation (BOTCC), became the
first independent clearinghouse for futures markets in the
United States. Today, the original mandate for CCorp remains
intact - to ensure the financial integrity of the futures
and options contracts traded on the markets for which it clears.
Throughout its history, CCorp has proven itself to be a clearinghouse
dedicated to integrity and innovation with both its members
and other institutions in the financial marketplace.
The
Clearing Corporation continuously evolved to meet the needs
of the ever-changing derivatives market. It has been the industry
innovator while continuing its role as guarantor of exchange-traded
futures and options.
CCorp
takes every submitted trade and continuously matches, throughout
the day, the clearing participant buyer with the clearing
participant seller.
Upon
acceptance of a matched trade, The Clearing Corporation is
substituted as the counterparty to each clearing participant counterparty
to the trade (i.e., CCorp acts as the buyer to every clearing participant seller and the seller to every clearing participant buyer).
In this way, The Clearing Corporation guarantees performance
of all trades it accepts, in accordance with its Bylaws, rules,
policies and procedures.
Since
CCorp's opening in 1925, no customer has lost money as a result
of a default by a clearing participant to The Clearing Corporation.
This demonstrates The Clearing Corporation's important role
of ensuring the integrity of the marketplace.
Technology
CCorp, the first clearinghouse to use computers in its processing
and clearing systems, continues to be the leader in the use
of technology throughout the clearing process.
The
entire process of clearing is computerized. Trading positions
are sent to The Clearing Corporation through real-time computer
networks. As the processing and clearing procedures are completed,
the participant firms' positions are instantaneously sent
through those networks back to the firms' risk management
systems. This process occurs on a 24-hour basis.
As
new and sophisticated electronic trading platforms and trading
mechanisms are developed, as well as new products offered,
CCorp upgrades its capabilities to interface with those systems
and to clear the new products. By
providing the interfaces for member firms to use their new
electronic trading technologies for better risk management
and trade confirmation, The Clearing Corporation is truly
a technology facilitator.
The
Clearing Corporation constantly evaluates market technology
needs of today and tomorrow, and is the forerunner in technology
development. Currently, CCorp staff is working with outside
hardware and software companies in an effort to stay ahead
in the technology race.
Clearing
The Future
The international financial markets are evolving and changing
with unprecedented speed. Today, many different types of trading
instruments are part of an interwoven global marketplace.
As a leader in clearing and settlement of futures and options
contracts, CCorp
has been the forerunner in designing international agreements
between clearinghouses to help stabilize international risk.
It also has developed sophisticated clearing arrangements
between both U.S. and foreign clearing entities. All of these
help to provide the international marketplace with a higher
level of risk management.
As
clearing and processing evolves with changing international
markets, The Clearing Corporation continues to set the pace
for innovation and integrity.
Risk
Management
In its clearing and settlement process, CCorp utilizes a sophisticated
risk management system. Key components of this risk management
system include:
- At
least once daily collection of original margin.
- At
least twice daily marking-to-market of all open positions
and payment and collection of related gains and losses.
- Continuous
match systems.
- Monitoring
of clearing participants' net mark-to-market obligations throughout
the trading day.
- Monitoring
of "large-trader" positions.
This
process of "risk management" allows CCorp to analyze participants'
net open trading positions and determine market exposure.
In addition, CCorp's continuous information flow to and from
its participants allows for proper monitoring of financial
risk and trading positions by participant firms' internal
risk management systems.
The
Clearing Corporation also actively communicates with other
self-regulatory organizations and, when appropriate, regulatory
authorities to ensure coordination of risk management activities.
In this regard, CCorp serves as the conduit for sharing risk
management information among commodities clearing organizations,
exchanges and securities clearing agencies.
Safety
and Soundness
Throughout its more than 75-year history, The Clearing Corporation
has built the most sophisticated credit and guarantee systems
in the world. Upon its inception in 1925, CCorp had an initial
capitalization of $2,500,000. Due to the size of the markets
at that time, this amount was more than adequate to ensure
that The Clearing Corporation could properly fulfill its role
as guarantor of the marketplace.
Today,
however, the markets have expanded and grown beyond the imagination
of The Clearing Corporation's founding members. The introduction
of new and sophisticated trading products requires The Clearing
Corporation to have new and innovative clearance and settlement
mechanisms and financial safeguards while still guaranteeing
the highest integrity of risk management.
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