Execution
Participants agree a trade under venue and contract rules.
MARKET INFRASTRUCTURE
Follow the trade.
Understand the safeguards.
Execution creates a position. Clearing and collateral govern what happens next.
Clearing
An eligible trade is accepted by a central counterparty, subject to its rules.
Margin
Collateral supports obligations; daily cash flows can create liquidity demands.
Settlement
Cash or delivery obligations follow the contract's final terms.
Illustrative centrally cleared lifecycle. Bilateral OTC arrangements follow different documentation and processes.
RISK DOES NOT DISAPPEAR
Clearing changes
how risk is managed.
A central counterparty stands between counterparties in accepted trades. This brings risk controls and default procedures, while concentrating obligations within the clearing framework.
[7] CME risk managementInitial margin
A buffer against potential future exposure over a risk horizon. Actual requirements depend on current models, products, positions and add-ons.
Variation margin
Cash flows reflect changes in marked-to-market value. Liquidity to meet calls can matter even when a hedge offsets an economic exposure elsewhere.
Collateral and default resources
Eligibility, haircuts, concentration limits and default-management rules are specific to each clearing arrangement.
[10] Eurex risk parametersBefore comparing two arrangements
Read the rulebook
Identify the legal counterparty, product terms, access model and settlement obligations.
Plan for cash flows
Distinguish economic exposure from the timing of collateral calls and realised cash movements.
Use the current model
Obtain official margin parameters and broker requirements. Our scenario lab does not calculate margin.