Central counterparty (CCP)

A central counterparty (CCP) clears transactions by novating or otherwise interposing itself between counterparties. It reduces bilateral counterparty risk through margin, default funds, netting and default management, but concentrates risk in a market infrastructure. In Switzerland, CCPs form part of financial market infrastructure and are subject to authorisation, prudential requirements and oversight. Cross-border recognition matters because Swiss participants often clear derivatives and securities through foreign CCPs.