Risk waterfall at CME, Ice makes porting harder, dealers say
The need to provide portability could pressure CCPs to lean more heavily on initial margin than default funds to absorb losses
The need to port client positions within central counterparties (CCPs) could force clearing houses to rethink how they structure the ‘risk waterfall’ used to absorb losses, dealers say. Clearing houses such as LCH.Clearnet’s SwapClear already lean more heavily towards initial margin – which individual members and their clients post to cover their own losses – while others, such as Chicago Mercantile Exchange (CME), are said to have a higher reliance on default funds, which are pooled
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