A business model used globally with Clearing Houses is a two tier membership structure, with the first tier being direct Members, who contractually face the Clearing House and must respond to all requirements and liabilities as a result of their membership. In the US these firms as known as Futures Commission Merchants (FCMs) although nowadays they clear a wide range of products, not just futures. Outside the US these firms are generally known as Clearing Brokers (CBs).
\nFirms who choose not to become a Member of a Central Counter Party (CCP) are generally known as Clients, hence the term Client Clearing.
\nEconomically and contractually a new trade for a Client (with their original Counterparty) is presented to the CCP by a Member, and assuming it is cleared is then split into this contractual structure (outside the US):
\nOutside US: Client Member CCP Original Counterparty
\nWithin the US, the FCM model has the Client in a direct relationship with the CCP legally, but with the FCM acting as a guarantor of sorts for default management and settlement:
\nUS: Client CCP Original Counterparty (but with settlement being via the FCM)
\nAny firm acting as an FCM or CB must settle all liabilities required by a CCP including Variation Margin, Initial Margin, Default \/ Guarantee Fund contribution, plus any capital charges on their own business for holding the Client Trades.<\/p>\n","protected":false},"excerpt":{"rendered":"
Firms who are not direct members of a clearing house must rely on having their trades cleared by an intermediary, who is a direct member of the Clearing House.<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false},"knowledge_category":[4248],"acf":[],"_links":{"self":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/knowledge_item\/165422"}],"collection":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/knowledge_item"}],"about":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/types\/knowledge_item"}],"wp:attachment":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/media?parent=165422"}],"wp:term":[{"taxonomy":"knowledge_category","embeddable":true,"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/knowledge_category?post=165422"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}