Does Cross-Margining Increase or Decrease the Overall Systemic Risk for the Clearing House?

Cross-margining is generally considered to decrease the overall systemic risk for the clearing house. By allowing traders to use capital more efficiently and requiring less total margin for diversified portfolios, it reduces the likelihood of individual trader defaults due to inefficient capital use.

However, it can increase risk if the correlation assumption between the cross-margined assets breaks down unexpectedly.