1. Non-standardized bilateral settlement mode: It is an early settlement mode. Both parties to a transaction independently complete the settlement, mainly relying on their own credit or third-party credit as a guarantee, but they will face greater credit risks, especially when conducting multiple transactions, and they will bear the credit risks of multiple opponents.
2. Standardized bilateral settlement mode: standardize the contents of OTC option contracts through the master agreement, reduce the default risk by increasing mortgage payment, and facilitate settlement between the two parties. Mainly corresponding to the trading mode of market makers, market makers are generally large commercial banks and other institutions with good credit, and provide reasonable quotations with their own good credit as a guarantee.
3. Central counterparty settlement mode: the essence is OTC, and the settlement is on the floor. It was first introduced by the New York Mercantile Exchange and Intercontinental Exchange in 2002, and its core is contract replacement and guaranteed settlement. The clearing house is the counterparty of both parties to the transaction, which transforms the original OTC option contract into two clearing contracts with the central counterparty. The central counterparty is generally a clearing house under each exchange, which has strong strength and better risk management ability than ordinary market makers.
In recent years, in order to reduce the systemic risk of OTC market, the proportion of central counterparty clearing has gradually increased around the world.