What Types of Assets Are Typically Accepted as Collateral for Margin? ⎊ Path

What Types of Assets Are Typically Accepted as Collateral for Margin?

Clearing houses typically accept high-quality, liquid assets as collateral for margin. The most common form is cash, usually in major currencies like the US Dollar, Euro, or Japanese Yen.

High-grade government securities, such as U.S. Treasury bonds, are also widely accepted. To account for potential fluctuations in the value of non-cash collateral, clearing houses apply a "haircut," meaning they value the asset at a discount to its current market price.

Some clearing houses may also accept other types of securities, but usually with larger haircuts.

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Clearing Houses

Settlement ⎊ Clearing houses, within cryptocurrency derivatives, function as central counterparties mitigating counterparty credit risk through novation of trades.