Answer: The clearinghouse will coordinate Johnson's settlement with any eligible settling shorts.

## Explanation In futures markets, the clearinghouse acts as the central counterparty to all trades, which means: - **Novation**: The clearinghouse becomes the buyer to every seller and the seller to every buyer - **Counterparty Risk Management**: The clearinghouse manages counterparty risk and coordinates settlements - **Settlement Process**: When a futures contract goes to physical delivery, the clearinghouse coordinates the matching of long positions with eligible short positions for delivery **Why Option A is correct:** The clearinghouse coordinates the settlement process by matching the long position (Jack Johnson) with any eligible settling short positions, not just the original counterparty. This is a key function of clearinghouses in futures markets. **Why other options are incorrect:** - **B**: Johnson does not need to contact the clearinghouse directly; the process is automated and managed by the clearinghouse - **C**: Futures positions are not closed with the original counterparty due to novation - the clearinghouse becomes the counterparty - **D**: The clearinghouse coordinates with any eligible settling shorts, not just the original counterparty This process ensures efficient and standardized settlement in futures markets while managing counterparty risk.

Author: LeetQuiz .