Page 25 - PRIAA Glossary
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CENTRAL COUNTERPARTY (CCP)
A clearing organisation that interposes itself through novation or otherwise, between the two original parties to the transaction, becoming the seller to the buyer and the buyer to the seller. Once interposed, a CCP will use risk management techniques to insulate members from any losses should a default occur. Typical functions of a CCP include calculating margin amounts, such as variation margin and initial margin; paying and receiving coupons and fees on trades; receiving and processing post-trade events, such as assignments or terminations; and performing netting of portfolios through various methods.
CENTRAL LIMIT ORDER BOOK (CLOB)
A trading model associated with firm, executable bids
in a transparent order book. Trading is anonymous and participants can trade with anyone on the platform with firm pricing. This model is associated with listed and highly standardised over-the-counter (OTC) products where competitive pricing and deep liquidity allows for completely transparent bids and offers. Only the most liquid OTC derivatives, such as long-dated IRS and Foreign Exchange transactions, are suitable for order book trading at present. Trade frequency for less liquid markets is too low to allow the continuous stream of prices a CLOB needs to function. For a common trading model which is associated more with less liquid markets, see “request for quote (RFQ)”.
CENTRAL SETTLEMENT (CREDIT DERIVATIVES)
A process by which the DTCC will settle cash movements and fees on eligible credit derivative trades using continuous net settlement (CNS). The DTCC, via CNS, will net these payments to one net payment per currency per counterparty for a given value date.
CERTIFIED EMISSION REDUCTION (CER)
The technical term for the output of clean development mechanism (CDM) projects, as defined by the Kyoto Protocol. A unit of greenhouse gas reductions that has been generated and certified under the provisions of Article 12 of the Kyoto Protocol, the CDM. Sometimes referred to as “certified emission rights”.
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