Clearing members fear $5 billion intra-day funding burden

Clearing houses can call for margin multiple times a day to protect against wild markets. But the burden of meeting those calls will initially fall on member firms – potentially creating a source of severe funding stress. By Matt Cameron

It's a clearing house risk manager’s nightmare – a day has passed since it last collected margin from its members, markets have tanked, and there is a margin gap that won’t be filled because two member firms have filed for bankruptcy overnight. To cover the losses, the central counterparty (CCP) will have to draw on the initial margin reserves posted by the defaulting firms, and if markets continue to swing, the damage could spill into the rest of the CCP’s default waterfall.

That’s why most