How Do “Segregated Accounts” Reduce Counterparty Risk for Institutional Derivatives Traders?
Segregated accounts ensure that a client's margin and collateral are held separately from the exchange's or broker's own operational funds. This arrangement protects the client's assets in the event of the exchange's or broker's insolvency.
By separating client funds, segregated accounts drastically reduce the counterparty risk that the institution will lose its collateral due to the failure of the intermediary.
