CCPs: how deep is your waterfall?

I want to compare one CCP versus another. I want the CCP to tell me how many clearing members – starting with the largest – that the default fund covers. Does it cover only the largest clearing member, the top three, five or 10 clearing members, or everybody? How deep is the waterfall?


Portfolio margining sounds good but in a default it could be toxic. You have to unwind everything together or you get a close out mismatch when one side of the portfolio becomes gross and not net, but there is only net margin to cover a now gross risk. It is like pulling the plug on the waterfall, suddenly it’s not as deep as you thought it was.


Tags: CCPCCPsRiskWaterfallClearingRegulationdefault fund