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I know this may sound like a stupid question but I have not yet found an adequate definition of the two that can clearly tell me the difference between them.

4 Answers 4

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Sometimes a clearing house is called a CCP or Central Counterparty. For exchange traded options, the Clearing House or CCP is the counterparty to every transaction.

I am not aware of any distinction though have not specifically heard the term "counterparty clearing house" on its own.

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The main different is I supposed on its legal standing, a CCP novate the trade from two parties - thus become a part of trade, while clearing house guaranteed the trade settlement (not directly become part of the trade)

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  • What is "novate"?
    – RonJohn
    Commented Feb 6, 2020 at 17:33
  • Novate means replacing an agreement with another. Commented Apr 9, 2021 at 10:58
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I would say they differ for the market in which operate and obviously for the regulation. CCP operates for Over The Counter markets so it is the Clearinghouse (Clearing corporation) for OTC and non standard contracts. They both allows counterparties to meet each other and also gaurantee the solvency of the long and short trader.

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I understood this from the John C Hull book on options, futures and other derivates. I think everything is same between clearing house and central couterparties, except that in CCP, first the contract has to be agreed and decided by both the parties, which will then be presented to CCP, and they may accept the transaction on their discretion. After that CCP, acts as a clearing house.

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