Page 29 - PRIAA Glossary

negotiated in order for the direct member to act as a clearing broker or futures commission merchant (FCM), interacting with the CCP on its behalf.
CLIENT CLEARING
Clearing for the client of a direct member of a clearing house that does not meet the eligibility rules to be a direct member. A client clearing member is able to clear trades via an intermediary who provides a client-clearing service. The intermediary stands between the clearing house and
the client, handling all cash flows, including coupons, one- off fees and all margin calls from the clearing house to
the client. Under the Dodd-Frank Act, clearing members must register as futures commission merchants (FCMs) if they wish to act as an intermediary and clear client trades.
CLIENT DUE DILIGENCE
Measures to verify that the client is who they say they are according to money laundering regulations.
CLIQUET
A structured trade where the payoff can be likened to that of a series of consecutive forward-starting options, the strike price of each being the settlement price of the previous. The profit from each period (being the strike price differential) can either be paid after each period, held to maturity and then paid—or manipulated in a more exotic fashion at maturity. Also known as “ratchet option” or “cliquet option”.
CLOSE-OUT NETTING
The process following the occurrence of a termination event or an event of default by one or both counterparties under
an ISDA master agreement, resulting in the designation
or occurrence of an early termination date and the early termination of all affected transactions. The net exposure one party has to its counterparty in respect of the terminated transactions is determined to arrive at a net settlement amount owing from one party to the other.
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