What Are the Primary Mechanisms a CCP Uses to Manage a Member's Default? ▴ Learn

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

The CCP utilizes a multi-layered "default waterfall" structure to cover losses. This includes the defaulting member's margin and default fund contributions, followed by the CCP's own capital, and then the non-defaulting members' default fund contributions.

The CCP also has the power to liquidate the defaulted member's positions in an orderly manner to minimize market disruption.

What Is the Risk to the Clearing House If a Member Fails to Pay Variation Margin?

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?

How Does the CCP’s Default Management Process Maintain Market Integrity?