14. September 2021
With the exception of the above or a letter signed by both parties, the EUSA may not be amended or supplemented. No distributor, representative or staff member of the CCP shall be allowed to amend or supplement the AESA. The financial turmoil that began in 2007 gives regulators the opportunity to investigate the causes of the financial crisis. They identified OTC transactions as one of the possible causes of the global financial crisis and concluded that this market should be „secure“. The joint agreement was to transfer the OTC trading system to a central counterparty platform of the Central Clearing Party. The main idea is to set up CCPs, trusted financial institutions, in order to replace the bilateral relations that prevailed between two counterparties with centralised multilateral relations involving CCPs. The seller would sell the contract to CPP and the buyer would buy the contract from the CCP. This will allow for effective supervision, as the CCP can set the necessary safeguards and monitor the positions of both parties under new regulatory rules. This new infrastructure, implemented for the OTC derivatives market, will theoretically significantly reduce the overall counterparty risk observed in this market.
Central counterparty clearing houses (CCPs) perform two main functions as intermediaries in a transaction: clearing and settlement. As counterparties to buyers and sellers, CCPs guarantee the terms of a negotiation, even if a party is late in the agreement. CCPs assume most of the credit risk of buyers and sellers when clearing and settling market transactions. The Presidency of the Council and the European Parliament today reached agreement on a common set of rules for CCPs (CCPs) and their authorities to prepare for and manage financial difficulties. . . .