Clearing NOREXECO traded contracts through European Commodity Clearing AG (ECC) denotes all activities from the time a commitment is made for a NOREXECO transaction until it is finally settled.
In general, a clearing house (Central Counter Party/CCP) acts as an intermediary to two trading entities, where the clearing house post trade takes on the counter party risk against each of the two trading entities.
In trading of futures contracts settlement is agreed on for a future settlement date, hence creating counterpart/credit exposure and settlement risk. Clearing involves the management of post-trading, pre-settlement credit exposures to ensure that trades are settled in accordance with market rules, even if a buyer or seller should become insolvent prior to settlement. Processes included in clearing are risk margining, netting of trades to single positions, reporting/monitoring and failure/deafult handling.