What Is “Default Fund” or “Guaranty Fund” at a Clearinghouse?
A default fund, or guaranty fund, is a pool of financial resources contributed by the clearinghouse and its member firms. It serves as the last line of defense to cover losses that exceed the margins of a defaulting member.
Its purpose is to ensure the continued financial stability of the clearinghouse and protect non-defaulting members and the broader market from systemic risk.
Glossar
Last Line of Defense
Barrier ⎊ The Last Line of Defense represents the final, non-negotiable security barrier designed to prevent the unauthorized loss of capital, even after multiple preceding security layers have been breached.
Default Fund
Fund ⎊ The Default Fund, within the context of cryptocurrency derivatives, options trading, and broader financial derivatives, represents a segregated pool of assets designated to cover potential losses arising from counterparty default.