### Question
How is the term multilateral clearing organization defined?


### Answer
The term **multilateral clearing organization** is defined in *12 U.S.C. § 4421* as the following:

> a system utilized by more than two participants in which the bilateral credit exposures of participants arising from the transactions cleared are effectively eliminated and replaced by a system of guarantees, insurance, or mutualized risk of loss

#### Citation:
  - *12 U.S.C. § 4421*
  - Heading: **CHAPTER 45-PAYMENT SYSTEM RISK REDUCTION > SUBCHAPTER II-MULTILATERAL CLEARING ORGANIZATIONS**

