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How OTC to CCP clearing works: Difference between revisions
→How will mandatory OTC=>CCP clearing change things for in-scope swaps?
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===In a {{nutshell}}=== | ===In a {{nutshell}}=== | ||
Where parties wish to execute [[OTC]] swap transactions which are subject to mandatory clearing they will execute a clearing agreement such as the FIA-[[ISDA]] [[Cleared Derivatives Execution Agreement]]. This can be an annex to their {{isdama}} or the the [[FIA]] terms of business. | Where parties wish to execute [[OTC]] swap transactions which are subject to mandatory clearing they will execute a clearing agreement such as the FIA-[[ISDA]] [[Cleared Derivatives Execution Agreement]]. This can be an annex to their {{isdama}} or the the [[FIA]] terms of business. | ||
===How will mandatory OTC | ===How will mandatory OTC to CCP clearing change things?=== | ||
The relationship between the {{ccp|end user}} and the {{ccp|dealer}} — currently memorialised in a {{isdaprov|Confirmation}} for a {{isdaprov|Transaction}} under an {{isdama}} — will continue, but the {{ccp|dealer}}, in its capacity as a {{ccp|clearing member}} of the {{ccp|clearinghouse}}, will act as a “[[clearing agent]]” for the {{ccp|end user}}. | The relationship between the {{ccp|end user}} and the {{ccp|dealer}} — currently memorialised in a {{isdaprov|Confirmation}} for a {{isdaprov|Transaction}} under an {{isdama}} — will continue, but the {{ccp|dealer}}, in its capacity as a {{ccp|clearing member}} of the {{ccp|clearinghouse}}, will act as a “[[clearing agent]]” for the {{ccp|end user}}. | ||
The {{isdaprov|Transaction}} between the {{ccp|end user}} and the {{ccp|clearing member}} will continue under a new customer agreement (which may be a modified {{isdama}}), but the {{isdaprov|Transaction}} will be subject to the {{ccp|clearinghouse}} rules. | The {{isdaprov|Transaction}} between the {{ccp|end user}} and the {{ccp|clearing member}} will continue under a new customer agreement (which may be a modified {{isdama}}), but the {{isdaprov|Transaction}} will be subject to the {{ccp|clearinghouse}} rules. | ||
The {{ccp|clearinghouse}} now stands between the parties to a trade, effectively guaranteeing performance of each party’s obligations under that trade. | The {{ccp|clearinghouse}} now stands between the parties to a trade, effectively guaranteeing performance of each party’s obligations under that trade. | ||
==={{ccp|Agent}} or {{ccp|principal}}?=== | ==={{ccp|Agent}} or {{ccp|principal}}?=== | ||