What Happens If the Entire Default Waterfall Is Exhausted and Losses Still Remain?

In the rare event that the entire default waterfall is exhausted, the clearing house may have additional tools at its disposal. These can include the right to call for additional "assessment" contributions from its surviving members.

If these are insufficient, the clearing house may have to use more drastic measures, such as variation margin gains haircutting, where profits owed to members are reduced to cover the shortfall. Ultimately, if all else fails, the clearing house could face insolvency, which would trigger a resolution process under the relevant regulatory regime.