Clearing system

Function of Clearing-House

JCCH acts as a counterparty to every transaction executed on the member exchanges, and insures performance on the terms of the contract to the benefit of all market participants.

Execution of trading among clearing participants


Execution of trading between clearing participants and non-clearing participants



*1  ③”novation” is exchange matches buyers and sellers,while JCCH consummates transactions with both sides. JCCH performs novation/substitution, and becomes seller to buyer and buyer to seller. In this way buyers and sellers are guaranteed their performances by JCCH. Buyers and sellers no longer have credit exposure to one another.

*2  “Commodity clearing transaction” is what makes it a condition that clearing participants (B) receive the consignment of the commodity clearing transaction from members and others of the commodity exchange (A) and making it undertake the debt based on transactions in the commodity market to the Clearing-House of commodity tradings, and making it to settled the said transaction that members and others (A) substitute for clearing participants (B).


To secure the safety of transactions in the commodity futures market, there is a daily settlement process, whereby the accumulated profits (losses) on all open or unsettled transactions are calculated and transferred to the appropriate accounts. This process is called “marking – to – market”. Under this process, clearing participants with accumulated losses must add additional capital to their accounts to secure their open position. At the same time, clearing participants with accumulated gains are able to withdraw those funds to insure prudent funds flow management.

In the event of a default, the risk to clearing participants is thereby limited to the extent of 2 business days.

JCCH operates under the T+1 method of pays and collects, meaning that all profits/losses (change in value) in all accounts is received or paid by clearing participants by noon of the business day following the day the change occurred.

This entire process goes a long way to insure market integrity.

Overview of the pays and collects process


Clearing process


The clearing operation of JCCH is carried out under the following procedure, primarily involving the exchange member (EM):

  1. The EM *1 executes the customer’s order.
  2. The EM designates the order as “house or customer”, and “new or settlement” to the commodity exchange *2.
  3. Each commodity exchange calculates the netted amount (the net profit or loss, the membership fee, etc), and delivery margin for each trading member, and notifies JCCH of such amounts.
  4. The EM who is the clearing participant notifies JCCH with regard to the amount of the clearing margin calculated with respect to each customer, based on predetermined classification of each customer.
    The EM notifies JCCH of the total of the clearing margin maintenance amount *3of customer account and the total of deposit requirement for customers based on the predefined classification of each customer.
  5. JCCH notifies clearing participants and the settlement bank of the calculation result of netted amount for each clearing participant outlined in step 3 above and the application result for notification and deposit/refund of the total amount of deposit requirement on the step 4 above.
  6. Clearing participants pay or collect the netted amount, and any change in the required margin deposit, by the noon of the following business day (T+1) through the settlement bank.


*1  The EM here refers to those who are “Commodity Futures Trading Firms”, members of exchange with Futures Commission Merchant (FCM) licenses, and at the same time are clearing participants at JCCH.

*2  Some exchanges require EM to designates “house or customer” and “new or settlement” at the time of executing orders.

*3  Clearing margin maintenance amount refers to the amount obtained by adding the delivery margin to the clearing margin requirement calculated based on SPAN.

Clearing funds system

All clearing participants are required to make a clearing fund to the JCCH. For all new clearing participants, whatever their qualification, their status as clearing participants becomes effective only after payment of the initial capital deposit. The level of the required clearing funds will be determined based upon the cumulative volume of trading cleared by the clearing participants, with additional capital being required for greater larger amounts of trading.

The fund is separately maintained for each market of each exchange.

If there is a loss suffered by JCCH as a result of a default by a clearing participants, the clearing funds and margin monies deposited by that clearing participants will be used to satisfy the loss. If those amounts are not sufficient to satisfy the loss, the remaining loss will be covered by the clearing funds of other clearing participants.