What is a function of SIX x-clear Ltd?

What is a function of SIX x-clear Ltd?

• A. It charges no collateral.
• B. It trades only for corporate bonds.
• C. As a central counterparty, it guarantees the fulfilment of its obligations.
• D. It sets the daily settlement price.

Answer: (C)

The function being tested is how a central counterparty clears trades. SIX x-clear Ltd acts as that central counterparty by novating trades so it becomes the counterparty to both sides of every deal—buyer to seller and seller to buyer. This guarantees that the obligations will be fulfilled even if one participant defaults, which dramatically reduces credit risk for everyone involved. To make this guarantee possible, the CCP requires margin from participants and maintains a default fund to cover potential losses, while enforcing standardized settlement procedures. In short, its core job is to ensure the contract is settled reliably, not to be a trader itself, not to rely on no collateral, and not to set the daily settlement price.

The function being tested is how a central counterparty clears trades. SIX x-clear Ltd acts as that central counterparty by novating trades so it becomes the counterparty to both sides of every deal—buyer to seller and seller to buyer. This guarantees that the obligations will be fulfilled even if one participant defaults, which dramatically reduces credit risk for everyone involved. To make this guarantee possible, the CCP requires margin from participants and maintains a default fund to cover potential losses, while enforcing standardized settlement procedures. In short, its core job is to ensure the contract is settled reliably, not to be a trader itself, not to rely on no collateral, and not to set the daily settlement price.