How Does a Swap-Based ETF Typically Post Collateral to Mitigate Counterparty Risk?

The swap-based ETF requires the counterparty to post collateral, often a basket of highly liquid, high-quality assets (like government bonds or blue-chip stocks), into a segregated account. This collateral must be equal to or greater than the swap's exposure to the counterparty.

If the counterparty defaults, the ETF can seize the collateral to cover the loss.