# OTC clearing

> Mediated Wiki article. Canonical URL: https://mediated.wiki/source/OTC_clearing
> Markdown URL: https://mediated.wiki/source/OTC_clearing.md
> Source: https://en.wikipedia.org/wiki/OTC_clearing
> Source revision: 1327898995
> License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/)

**OTC clearing** refers to a process under which standardized [derivative contracts](/source/Derivative_contract) which relate to [over-the-counter](/source/Over-the-counter_(finance)) transactions will be [cleared](/source/Clearing_(finance)) through an agency established by a [stock](/source/Stock_exchange) or [commodities exchange](/source/Commodities_exchange).

## Purpose

The point of OTC clearing is to avoid having the effect of financial shocks amplified through means not supervised by the agencies, to encourage [transparency](/source/Transparency_(behavior)) of the pricing of these standardized [financial products](/source/Financial_products), and to mitigate [credit](/source/Credit_risk) and [default risks](/source/Default_Risk) associated with over-the-counter trading.[1]

## References

1. Bull, Alister (June 22, 2009). ["Fed: central OTC clearing would curb market risk"](https://www.reuters.com/article/us-derivatives-fed-sb/fed-central-otc-clearing-would-curb-market-risk-idUSTRE55L57Z20090622). *Reuters*. Retrieved January 27, 2020.

---
Adapted from the Wikipedia article [OTC clearing](https://en.wikipedia.org/wiki/OTC_clearing) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/OTC_clearing?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.