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What is the role of a Clearinghouse in futures markets?

What is the role of a Clearinghouse in futures markets?

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Answer #1

Followings are the main roles of a Clearinghouse in futures markets;

1. Clearing house provides better guarantee for all associated parties & all transactions because all relevant transactions take place throught the clearing house.

2. Clearing house provides smooth platform for trading because all associated parties feel safe and it also help in improving confidence in the trading system.

3. Clearing house also help in improving liquidity for trading.

4. Clearing house help in managing proper risk management system.

5. Clearing house promotes consistent supply of the underlying asset because it helps in managing proper level of underlying assets etc.

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