What Are the Risks Associated with the CCP Itself Becoming Financially Distressed?

The failure of a CCP poses a significant systemic risk, as it is the central node for counterparty risk. Risks include the potential for massive, unmanageable losses that exceed the default fund, the disruption of the entire clearing and settlement process, and the forced liquidation of all outstanding positions.

This could lead to a widespread financial panic and the freezing of major derivatives markets.