New regulatory powers Financial market infrastructure: general rules and requirements Regulation of CCPs and CSDs by the Bank of England
Firms use CCPs to reduce certain risks that arise when entering into financial transactions with other parties, such as derivative transactions or buying and selling securities. CCPs sit between the buyers and sellers of financial contracts, providing assurance that the obligations under those contracts will be fulfilled. Instead of holding the contract with each other, the buyer and seller each hold their side of the contract with the CCP instead. The process of transacting through a CCP is known as "clearing".
	CSDs hold financial instruments (securities), such as shares, and play a key role at the center of financial markets by enabling securities to be issued (through creating the record of a security on their ledgers), settled (by updating their records to reflect the transfer of securities between market counterparties) and maintained (performing administrative tasks relating to securities, such as the processing of dividend payments).