Chapter 04 · Section 4.1
Nestlé
Let us look at the same question from another angle: a transaction has been completed. Customer A bought 1 Nestlé Jan 10,000 call option, Customer B has written that option. As a result, customer A is long 1 Nestlé Jan 10.000 call, customer B is short 1 Nestlé Jan 10.000 call and...
a) Customer A has a contractual relationship with customer B.
b) Customers A and B have a contractual relationship with their respective brokers, who in turn have one with a clearing member or the clearing house directly.
c) Customer A and B have a contractual relationship with the clearing house directly.
d) Customer A and B have a contractual relationship with the exchange.
Remember that the exchange does not want to have to assess the credit-worthiness of every individual customer.
The clearing house acts as final guarantor to the positions it clears.