LCH and dealers clash over loss allocations
Isda AGM: CCP equity should not be spared, say clearing members
LCH.Clearnet and its dealer members are divided over whether clearing houses should compensate non-defaulting members if they have to absorb losses caused by another member's default.
Central counterparties (CCPs) have a set amount of resources for such situations, the distribution of which is allocated via a waterfall. Losses would first be met by a defaulting member's initial margin and default fund contribution, followed by non-defaulting members' default fund contributions, and then a
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