Glossary · C
What is Clearing house?
The central counterparty that guarantees both sides of every exchange-traded futures trade and handles daily mark-to-market.
In context
After the trade, a clearing house steps in between the two sides. The clearing house becomes the buyer to every seller and the seller to every buyer. You never have to trust or even know the person on the other side of your trade. If they fail to pay, the clearing house (backed by the margin system you will learn about in the next section) makes sure you are paid. Failing to meet one's obligations in a contract is called default, and the clearing house exists to remove that worry.
Learn it in depth
- Chapter 0: Trading from Zero: Markets, Gold, CFDs and Futures
- Chapter 1: The Gold Futures Contract and the Trading Day
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