The main functions of futures clearing institutions include: ensuring the performance of transactions, clearing the profits and losses of transactions, and controlling market risks.
(1) Performance of secured transactions
1. The settlement institution becomes the buyer of all contract sellers and the seller of all contract buyers.
2. It is precisely because clearing institutions have replaced the original counterparties that clearing members and their customers can hedge their contracts at any time without the consent of the original counterparties, so that the hedging and clearing methods of futures trading can be implemented.
(2) Settlement of trading profits and losses
(3) Controlling market risks
1. The guarantee performance of clearing institutions is often realized through the settlement and dynamic monitoring of members' deposits.
2. The clearing institution requires members' deposits to always be higher than the prescribed level.
3. When the member's margin can't reach the required level due to the loss caused by the unfavorable change of market price, the settlement institution will issue a notice of additional margin to the member. After receiving the notice, the member must pay the deposit in full within the specified time of the next trading day, otherwise the settlement institution has the right to forcibly close the position.