Which of the following best describes a central counterparty
A) It is a trader that works for an exchange
B) It stands between two parties in the over-the-counter market
C) It is a trader that works for a bank
D) It helps facilitate futures trades

Question

Quizplus · Accepted Answer

A central counterparty (CCP) stands between two parties in the over-the-counter market, acting as a buyer to the seller and a seller to the buyer. It ensures the performance of the trade, manages risk and helps to facilitate trading in various financial markets. Options A, C and D do not accurately describe a central counterparty.

Which of the Following Best Describes a Central Counterparty