What Happens to Client Positions If a Suitable Receiving Member Cannot Be Found for Porting?
If a suitable receiving member cannot be found for porting, the clearing house may have no choice but to liquidate the client positions. This means the clearing house would close out the positions in the open market.
While this is a last resort, it is done to terminate the risk associated with the positions. Any remaining collateral after the positions are closed would then be returned to the clients, typically through the bankruptcy proceedings of the defaulted member.
Glossar
Clearing House
Role ⎊ The Clearing House acts as a central counterparty (CCP) in traditional and centralized crypto derivatives markets, interposing itself between buyers and sellers to guarantee the performance of the contract.
Bankruptcy Proceedings
Resolution ⎊ Bankruptcy proceedings involving cryptocurrency entities, options traders, or firms dealing in financial derivatives necessitate a unique approach to asset identification and valuation, given the inherent volatility and jurisdictional complexities of these instruments.