The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

Appendix B

Glossary¹

Algorithmic trading (also automated or algo trading) The use of computers to make trading decisions with the computer algorithm deciding such features as the timing, price or quantity of the order, and often initiating the order without human intervention. See also high-frequency trading, which has grown rapidly on the back of the increased speeds and capabilities of algorithmic processing.

Arbitrage The exploitation of price differences in connected markets.

Back office The part of a firm that is responsible for post-trade activities.

Back testing An ex-post comparison of observed outcomes compared with expected outcomes.

Bilateral collateral agreement An agreement that defines the terms or rules under which collateral is posted or transferred between counterparties to a non-cleared OTC derivatives contract.

Central Counterparty (CCP) An entity that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer, with the aim of ensuring that trades are completed if one or more counterparties defaults.

Central counterparty CCP link An arrangement between two or more CCPs that provides clearing of trades between the participants of the CCPs involved, without obliging participants of one CCP to become members of the other CCPs.

Central securities depository (CSD) An infrastructure that holds or controls the holding of physical or dematerialised financial instruments ...