Benefits of Clearing

Post Trade Transparency for Trades

Unlike the model of SWX Europe, participants of SIX Swiss Exchange will see the identity of their market counterparty in the trading system of the SIX Swiss Exchange. However, this does not alter the contractual nature of the trade, once it is executed. This change to the traditional anonymous CCP model is to facilitate the efficient execution of large trades in less liquid.

Risk management

The prime purpose of a CCP is to minimise counterparty risk for members on market trades. In any trading environment, the certainty of counterparty performance cannot be managed entirely by members' in-house measures. With the interposition of a CCP between every buyer and seller, a member has a single counterparty - the CCP. The CCP is able to mitigate its risk by utilising a range of defences including margin cover, default funds and insurance to protect itself and the market from member default.

Settlement netting

Each member has the CCP as its single counterparty, enabling it to net trades with multiple trading counterparties in any one security to a single settlement per day. This helps in reducing settlement cost, back-office overhead, and operational and counterparty default risk. Moreover, because netting is on a multilateral basis against the CCP, full Delivery versus Payment can be retained.

Netting effectively caps the number of settlements, allowing members to increase trading activity without incurring equivalent increases in back-office costs.

Additionally, the SIX Swiss Exchange membership offers a wide range of trading activities. A side effect of this broad-based market place is that larger orders placed on the order book may attract a number of smaller fills. For members settling on a net basis this overhead is removed.

The CCP Member Service Description provides more detailed information about the Central Counterparty Service, including the benefits of clearing.