Clearing and IFEX Security

In addition to the buyer and seller, there are three other parties involved in the transaction:

The ‘Exchange’ (Chicago Climate Futures Exchange); the ‘Clearing House’ (The Clearing Corporation) and the ‘Clearing Member(s)’.

In order to trade on IFEX it is necessary to become a client of a Clearing Member of the Chicago Climate Futures Exchange.

There are a number of Clearing Members which you might select to handle your IFEX account. These are listed under How to Trade IFEX, where you will also find information about how to establish an account with a Clearing Member and obtain screen access.

The function of margin payments:

A flow of revenue called margin moves between the accounts of the parties established with the Clearing Member.

For a detailed explanation of margin, please return to 'IFEX Basics' and select the appropriate page.

The role of the Chicago Climate Futures Exchange:

CCFE provides the trading platform.

The role of the Clearing Corporation:

The Clearing Corporation is then the central counterparty and clears all ‘margin’ transactions (hence ‘cleared’).

The Clearing Corporation guarantees all transactions. Combined with the role of the Clearing Member - this largely eliminates counterparty risk.

The role of a Clearing Member:

The Protection Buyer and Seller each establish an IFEX account with a Clearing Member of their choice.

The Clearing Member carries out its own checks on the financial standing of its clients.

If the client defaults, then the Clearing Member must meet its client’s commitments.

The Clearing Member seeks an appropriate deposit (called Maintenance Margin) from its client suffice to support any  transaction.

The Clearing Member receives and transfers the Variation Margin that flows between the accounts of the parties as prices change.

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