How Does the Default Waterfall of a CCP Protect Its Non-Defaulting Members? ▴ Learn

How Does the Default Waterfall of a CCP Protect Its Non-Defaulting Members?

The default waterfall is a pre-defined sequence of financial resources a CCP uses to cover losses from a defaulting member. It typically starts with the defaulter's posted margin, then the CCP's own capital, followed by the mutualized default fund contributions from non-defaulting members, and potentially a further assessment.

This structure protects the market by ensuring losses are absorbed in a controlled, pre-agreed manner.

What Is the ‘Default Waterfall’ in CCP Risk Management?

What Are the Primary Mechanisms a CCP Uses to Manage a Member’s Default?

How Does the ‘Waterfall’ Mechanism Protect a CCP against a Large Member Default?

How Does the Concept of ‘Waterfall’ Loss Allocation Work in a CCP?