What Role Does the Clearing House’s Own Capital Play in a Default Scenario?

A clearing house's own capital, often referred to as its "skin-in-the-game," is a specific layer in the default waterfall. It is typically used after the defaulting member's resources are exhausted but before the default fund contributions of non-defaulting members are touched.

This ensures the clearing house is incentivized to manage risks prudently, as its own funds are at stake. The amount of capital is predetermined and serves as a critical buffer to absorb losses and build confidence in the clearing house's resilience.