What Is the “Waterfall” Structure of a CCP’s Financial Resources?
The waterfall is the predefined, sequential order in which a CCP applies its financial resources to cover losses from a member default. The typical order is: 1) Defaulting member's margin, 2) Defaulting member's default fund contribution, 3) CCP's own capital (Skin-in-the-Game), 4) Non-defaulting members' default fund contributions, and finally, 5) Potential assessment of non-defaulting members.
