Payments and Market Infrastructure
The Global Risks Alliance (GRA)
A central counterparty steps between buyers and sellers, guaranteeing trades and netting exposures. Mandatory central clearing of standardised derivatives made CCPs critical: their failure would be systemic. CCPs manage default risk with margin, default funds and recovery tools, and their margin calls can drain liquidity in stress. This page sets out how CCP risk arises and transmits, how it is measured, and who decides.
GRA · In development · service level R0
Central counterparty risk is the risk concentrated in clearing houses that guarantee trades between members, and the liquidity strain their margin calls can create. CCPs manage it with margin, default funds and recovery tools. Supervisors, resolution authorities, CCP risk committees and clearing members hold the decisions.
How a failure at one financial centre can spread through settlement links. Design links, not real dependencies.
CCPs, collateral and liquidity. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
When a member defaults, its margin and default fund contribution are used first, then CCP capital, then other members' contributions. The order and size decide who bears losses.
Higher volatility raises initial and variation margin. Members and their clients must pay in cash quickly, which can force asset sales.
Large banks are members of many CCPs. A member default affects several CCPs at once, and CCP losses return to the same members.
If losses exceed prefunded resources, recovery tools such as cash calls and loss allocation apply, and authorities may resolve the CCP.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Initial margin | Collateral collected to cover potential future exposure if a member defaults. |
| Variation margin | Payments that settle daily changes in the value of open positions. |
| Default fund | A pool of resources contributed by clearing members to cover losses beyond a defaulter's margin. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Initial margin held | currency | quarterly | CCP public quantitative disclosures | OFFICIAL |
| Default fund size | currency | quarterly | CCP public quantitative disclosures | OFFICIAL |
| Cover requirement under stress | number of largest member defaults covered | quarterly | CCP disclosures | DECLARED |
| Peak variation margin calls | currency per day | quarterly | CCP disclosures | OFFICIAL |
| CCP skin in the game | currency | quarterly | CCP disclosures | OFFICIAL |
| Member concentration | share of initial margin from largest members | quarterly | CCP disclosures | OFFICIAL |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| CCP public quantitative disclosures (CPMI-IOSCO standard) | Margin, default resources, stress testing and liquidity data | Public records, terms per CCP |
| ESMA CCP stress test reports | EU-wide CCP stress tests | Free, EU reuse terms |
| CFTC clearing data | United States derivatives clearing organisations | Public domain |
| FSB and CPMI-IOSCO reports on CCP resilience and margin | Analysis of CCP margin and resources | Free, FSB and BIS terms |
| Bank of England CCP supervisory stress test reports | UK CCP stress testing | Free, Bank of England terms |
Payments and Market Infrastructure prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| CCP supervisors and overseers | Whether resources, margin models and recovery plans are adequate | Disclosures, stress tests and model reviews |
| Resolution authorities | How a CCP would be resolved | Resolution plans and loss scenarios |
| CCP risk committees | How margin models and default resources are set | Stress results and member feedback |
| Clearing members and clients | How much CCP exposure and liquidity need to plan for | Disclosures and margin history |
Reforms after the global financial crisis made central clearing mandatory for many standardized derivatives, increasing the importance of CCPs. A CCP's failure would be a major systemic event. Even without failure, CCP risk management can transmit stress: in volatile markets, margin calls rise sharply and can force members to find liquidity at the worst moment. Understanding these dynamics is a shared concern for members, clients and authorities.
CCP risk management relies on margin, mutualized resources and default management.
Initial margin covers potential future exposure; variation margin settles daily price changes. Both rise in volatile markets.
A defaulter's margin and contributions, the CCP's own capital and the mutualized default fund absorb losses in a set order.
Large banks are members of many CCPs, so stress at one member can affect several CCPs at once.
Episodes of extreme market volatility have shown how margin calls can transmit stress. Sharp price moves in energy, interest rate and equity markets have led to large, sudden margin calls, forcing some participants to sell assets or seek emergency liquidity. Research and policy work since then has focused on transparency and predictability of margin, so that members and clients can prepare.
CCPs publish standardized disclosures on margin, resources and stress testing. They allow comparison but omit detail.
Supervisory and CCP stress tests explore extreme scenarios. Results depend on scenario design.
Mapping of membership links between CCPs and banks, applying network science and contagion.
Study of margin call dynamics and their effect on members' liquidity during market stress episodes.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.