Today it is possible to conduct clearing on a wide range of Derivatives products such as equity, fixed income and commodities in the Nordics through NASDAQ OMX Clearing, and it's Nordic Clearinghouse.
Principal Function of a Clearinghouse
One of the principal functions of a clearinghouse is to guarantee that all contracts traded will be
honored. NASDAQ OMX Clearing becomes the counterparty in all transactions, i.e. acts as a buyer to the seller and as a seller to the buyer. Counterparty risk is the risk that one party in a transaction will not be able to fulfill its obligations in due time. In order to ensure that the clearinghouse has the capacity to fulfill its obligations, it requires and receives collateral from the participating counterparties. In addition, it holds a member sponsored default fund and retains its own capital resources as well.
NASDAQ OMX Clearing as Central Counterparty
- Participates as counterparty in every transaction, which is commonly referred to as a ‘counterparty undertaking'.
- Monitors the market and market participants.
- Reduces the number of deliveries and payments due to netting, and handles all payments not relating to deliveries on behalf of members.
- Provides secure and standardized transaction processing.
- Enables a clearing member to replace the counterparty risk between different market participants with the counterparty risk towards the clearing organization – even for instruments traded outside the exchange.
- Calculates and controls pledged collateral.
Please find a description of NASDAQ OMX as Central Counterparty here.