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Central counterparty (CCP) - Financial definition
Concise definition of the term central counterparty
An infrastructure - very often a component of a clearing house - that facilitates clearing and settlement for its members by standing between the buyer and the seller of a trade. It may net transactions, and substitutes itself as a settlement counterparty to each position.
Comprehensive definition of the term central counterparty
A central counterparty eliminates the counterparty risk in a financial transaction and thus mitigates replacement cost risk, which is the risk that the remaining party has to replace the trade at a less favorable price.
![Role of a central counterparty (CCP) in trading](../img/schemes/central-counterparty-ccp.png)