The Clearinghouse has mechanisms to ensure the settlement of its obligations to its non-defaulting participants, even if one or more debtors fail. These mechanisms are called Safeguard Structure and they are derived from Participants’ Structure.
Safeguard structure components
a) Collaterals deposited for the purpose of containing market risk
| Components | Contributors | Value Definition | Can be used for treating default of third parties? |
|---|---|---|---|
| Layer 1 | Investors | Risk | No |
| Operating Balance Adjustment | Full trading participants/ settlement participants and/or clearing members | Risk | No |
| Layer 2: Settlement Fund | Clearing members, full trading participants, settlement participants and B3 | Fixed | Yes |
b) Collateral deposited for the purpose of containing liquidity risk:
- Collateralized and uncollateralized liquidity assistance facilities;
- A portion of the B3 capital.
Default waterfall
|
|
1 - Defaulting customer’s collateral under defaulting broker and CMs |
| 2 - Defaulting customer’s excess collateral under other brokers and CMs | |
| 3 - Defaulting broker’s collateral | |
| 4 - Defaulting CM’s collateral | |
| 5 - Defaulting broker's contribution to default fund | |
| 6 - Defaulting CM’s contribution to default fund | |
| 7 - B3’s contribution to default fund | |
| 8- Non-defaulting CMs’ contributions to default fund | |
| 9 - B3's dedicated cash position to the CCP | |
| 10 - B3's other assets |
