A typical contract between two financial-market participants involves one agreeing to sell and later deliver a product (say, shares) and another agreeing to pay for it. The seller and buyer can agree terms privately (or 'over the counter').
But there are at least two problems. First, what if a big seller wants to remain anonymous so that word doesn't spread that they are trying to dump assets? And what if one party fails to honour their side of the bargain by not paying (buyer) or delivering (seller) on the agreed date?
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