Derivatives · glossary
A hub that stands between the two sides of a cleared trade, so each faces the hub and not the other. It calls margin from its members every day. Atlas cleared nothing, because its trades were private contracts on its loan's own dates. Schedule, Part 5.3 · Chapter 14
Explained in Chapter 14, The Wider Room, of Derivatives.
A central counterparty, or hub, changes the shape of the market. When a trade is cleared, the contract between the two parties is replaced by two contracts. Each party now faces the hub, and never the other party. The hub nets each member's trades, calls cash collateral (called margin here) from every member every day, and keeps a default fund paid in by its members.Read Chapter 14, The Wider Room →
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