What is clearing and why is it important? • We run a day-long seminar called “Clearing in a Day” that answers these two questions in detail. It is aimed primarily at those coming into the cleared derivatives industry for the first time • Clearing is the process of a clearing house intermediating a buyer and a seller, with the aim of protecting each of the buyer and the seller from the other’s default and ensuring settlement of their financial obligations to one another • Clearing replaces direct counterparty credit risk with CCP credit risk and mutualised clearing member risk, which is mitigated by regulator independent initial and variation margin calls • Clearing involves risk margining, reporting, the netting of trades into single positions, tax handling, failure handling and, for many clearing houses, compression - it also provides for standardised expiry and delivery processes • From a product perspective, “Cleared derivatives” covers futures, exchange traded options, swaps, certain commodities, repos and other derivatives that are intermediated by a clearing house UNRESTRICTED 45