How Does the Clearinghouse Manage Settlement Risk?

The clearinghouse manages settlement risk through several layers of defense. These include demanding initial and maintenance margin, daily mark-to-market settlements, having strict membership requirements, and maintaining a substantial default fund.

This multi-layered approach ensures that the risk of a failure to settle is minimized and that funds are available to cover any losses from a default.

How Does MTM Relate to the Concept of Realized and Unrealized Gains/losses?
How Does a Clearing House Ensure Its Own Financial Stability to Act as a Guarantor?
What Is the Significance of the Daily Settlement Price in MTM?
How Does a Clearing House Manage the Risk of a Simultaneous Default by Multiple Members?
How Does MTM Reduce the Risk of Default for the Clearinghouse?
What Is the “Default Fund” of a Clearinghouse Used For?
What Are the Primary Mechanisms a CCP Uses to Manage a Member’s Default?
How Does MTM Relate to Margin Requirements?