Central Counterparties (CCPs)

A Central Counterparty (CCP) is a financial organization that acts as the middleman in transactions between buyers and sellers of securities or derivatives. It reduces the risk that one party defaults by guaranteeing the trade completion, effectively becoming the buyer to every seller and the seller to every buyer. This process enhances market stability and efficiency, especially in complex or large-scale trading, by managing counterparty risk and ensuring that transactions settle smoothly even if one party faces financial difficulties.