NSCC’s Clearing Fund provides a liquidity and loss resource in the event of a member default. Clearing Fund Requirements are calculated and collected daily based on each member’s net unsettled positions.
Some key components of the Clearing Fund Requirement include:
- volatility charge – which is either a model-based VaR charge or a haircut-based charge depending on asset type and liquidity profile.
- margin requirement differential – which mitigates the risks from day-over-day fluctuations in a member’s portfolio.
- mark-to-market – which is the difference between the contract price and the current market price.