CCP Default Management

CCP default management is the comprehensive set of procedures a central counterparty uses to handle a member's default and restore the system to a balanced state. This includes the liquidation of the defaulting member's positions, the auctioning of their portfolio to other members, and the potential use of the default fund.

The primary objective is to minimize market disruption and prevent the default from spreading. These procedures are highly regulated and must be tested regularly through fire drills to ensure that all members understand their roles and responsibilities.

Effective default management is the hallmark of a robust clearinghouse, providing the assurance that the market can withstand even the most significant shocks.