How do CCPs manage risk?
A central counterparty relies mainly on having sufficient collateral from a clearing participant to cover any losses it might incur if that clearing participant defaulted under normal market conditions. The CCP needs to have access to additional resources if the collateral of the clearing participant is insufficient to cover losses under stress conditions.
The CCP must therefore ensure that its clearing participants are financially sound and are able to provide the collateral when due, calculate accurately collateral that would be needed if it had to replace the trades of a defaulted user at a loss, and have collected the collateral in time, i.e. before the customer defaults