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How Does MTM Reduce the Risk of Default for the Clearinghouse?

It prevents the accumulation of large losses by requiring daily settlement, minimizing clearinghouse exposure.
Greeks.Live21.11.25

How Does MTM Reduce the Risk of Default for the Clearinghouse?

MTM reduces default risk by ensuring that all losses are settled daily and immediately. By requiring traders to post variation margin (cash to cover losses) every day, the clearinghouse prevents the accumulation of large, unmanageable losses that could lead to a catastrophic default.

This daily settlement minimizes the exposure of the clearinghouse to any single participant's failure.

How Does the Daily Mark-to-Market Process Work for Futures Contracts?
Why Is a Fair and Transparent Settlement Price Crucial for Market Integrity?
How Does MTM Reduce the Potential for a Massive Loss on the Expiration Date?
How Does MTM Reduce Systemic Risk in the Financial System?

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