Explain the Clearing and Settlement Mechanisms of Futures and Options Contracts.

Clearing and settlement mechanisms play a crucial role in the functioning of equity derivatives markets, specifically in the context of futures and options contracts. These mechanisms are designed to ensure the smooth and efficient execution of trades, mitigate counterparty risk, and maintain the integrity of the financial system. Let's delve into the clearing and settlement processes for both futures and options contracts.

### Clearing Mechanism:

#### Futures Contracts:
In the context of futures contracts, clearing is the process by which a clearinghouse acts as an intermediary between the buyer and the seller. The clearinghouse plays a pivotal role in ensuring the financial integrity of the market. Here is how the clearing mechanism works for futures contracts:

1. Trade Execution:
   - Traders enter into futures contracts on organized exchanges. The exchange matches buy and sell orders, resulting in a trade.

2. Novation:
   - After a trade is executed, the clearinghouse becomes the counterparty to both the buyer and the seller. This process is known _______ ________ _____ _______ __________ ______ __________ _______.
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