What Is the Risk to the Clearing House If a Member Fails to Pay Variation Margin?

The failure to pay variation margin signals a member's financial distress and poses a direct risk to the clearing house. The CCP must immediately cover the unpaid variation margin to the profitable counterparty.

If the member defaults, the CCP must liquidate the member's positions and use the default waterfall to cover the accumulated losses, which now include the unpaid variation margin.