What Is a ‘Guarantee Fund’ and How Is It Funded by CCP Members?

A guarantee fund, also known as a default fund, is a pool of capital contributed by the CCP's clearing members. It serves as a second line of defense, after the defaulting member's margin, to cover losses resulting from a member's failure.

The fund is typically structured in layers, often with contributions from the CCP itself and the clearing members. Members contribute based on their activity and risk exposure.