What Is a 'Default Waterfall' in the Context of a CCP? ▴ Learn

What Is a ‘Default Waterfall’ in the Context of a CCP?

A default waterfall is a pre-defined sequence of financial resources a CCP uses to cover losses resulting from a clearing member's default. The typical order is: the defaulter's initial margin, the defaulter's contribution to the guarantee fund, the CCP's own capital, and then the non-defaulting members' contributions to the guarantee fund.

It is a strict loss-allocation hierarchy.

What Is the “Waterfall” Structure of a CCP’s Financial Resources?

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

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

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