Jurisdiction(s):
European Union

EU regulation of indirect clearing of ETDs and OTC derivatives: EMIR/MiFIR RTS, client asset segregation, porting and EU CRR leverage ratio

Published by a LexisNexis EU Law expert

Practice notes

What is clearing of derivatives?

Clearing is the mechanism that removes the usual danger that one side of a derivatives deal fails to perform (counterparty risk). The key participants in the clearing process are:

a specialist financial institution called a clearing house; and
other financial institutions—typically banks or brokers—that sign a clearing agreement with the clearing house; these are its clearing members, also referred to as clearing firms

In cleared transactions:

every trade is executed by clearing members, either for their proprietary books or on behalf of clients; and
the clearing house inserts itself between the clearing members to each deal, becoming counterparty to both sides—so each participant bears the clearing house’s credit risk, not that of the opposite side

Clearing members therefore need not concern themselves with who their clearing member opposite numbers are, or their credit quality, but only with the credit standing of the clearing house. The clearing house, on the other hand, carries the credit risk of the counterparties between whom it is positioned. The principal ways by which a clearing...

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Web page updated on 21/05/2026

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