In the event of a default of one Clearing Member or a simultaneous default of more than one Clearing Member, the Defense Lines (order of realization of collateral) come into effect to close out the relevant positions.
The core functionality of SIX x-clear Ltd as a central counterparty (CCP) is to eliminate bilateral counterparty risk by identifying, quantifying and monitoring risks in the most effective and transparent way. SIX x-clear deploys a number of different mechanisms to minimize counterparty risk.
The following mechanisms are in place to guarantee a consistent risk management framework for Members as well as markets:
- Duly monitored membership criteria
- VaR margin model for equities and fixed income offered across all platforms by using cross-margin netting and the highly sophisticated VaR MIDAS margin model offered by the Norwegian Branch
- Dedicated default fund for cash products (equities and fixed income) and one for derivatives and securities lending and borrowing transactions
- Segregated link margin model in interoperable markets to cover inter-CCP risk
- Risk-adjusted collateral criteria as part of the lending norms
- Standardized and modular legal framework for Clearing Members