As of February 2021, in the rulebooks of UK CCPs, a part of the CCP's own capital sits after the defaulting member's initial margin and default fund contribution and before the pre-funded default fund1. JSCC covers losses with its own contribution before the non-defaulting members' contributions2. The PFMI say that a specified part of the CCP's own financial resources may be included in the order of resources used to cover losses3.

HM Treasury says these funds are used first when a member defaults, which encourages robust risk management by the CCP. The size and position of these funds differ by CCP and by country.

Notes

  1. HM Treasury, "Expanded Resolution Regime: Central Counterparties" (February 2021), Annex A, paragraph A.47. ↩

  2. Japan Securities Clearing Corporation, "リスク管理 損失補償" (Risk management: loss compensation) page (in Japanese), main text. ↩

  3. "金融市場インフラのための原則（仮訳）" (Principles for financial market infrastructures, provisional Japanese translation), paragraph 3.4.17. ↩