Clearing and Settling Financial Transactions, Circa 2000
In order for a market to exist, there must be a mechanism to convey whatever is traded conveniently and safely between parties to the trades. Moreover, the scope of the market can only be as large as the community of traders who have access to such means of transfer. In particular, in a large market, traders who do not know one another must deliver assets and money in order to complete their trades. Each trader will only be willing to do so if he is confident that the reciprocal payment or asset transfer due to him will also be made. Such trust in the integrity of the market must be supported by formal, institutionalised safeguards.
KeywordsCentral Bank Federal Reserve Settlement System Original Contract Commodity Future Trading Commission
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