Clearing Fund

The Clearing Fund is a reserve fund set aside to cover a potential defaulting Clearing Member's deficit. Such deficit occurs when all the assets held as margin by CDCC outside the Clearing Fund doesn't suffice to cover a defaulting Clearing Member's market exposure. For the purpose of the determination of the size of the Clearing Fund, Clearing Members including its Affiliates are considered in the calculation.

The Clearing Fund is a shared obligation of all Clearing Members, excepted for Limited Clearing Members (LCMs), and provides coverage for uncovered residual risks, which are risks not covered by the Clearing Members' prefunded financial resources. Uncovered residual risks account for the fact that extreme market conditions may cause a major loss for specific Clearing Members, potentially causing a Clearing Member to default.

Since LCMs do not contribute to the Clearing Fund, CDCC requires that LCMs cover the risk exposure that arises if the total value of their risk to the CDCC is greater than the aggregate amount of the LCM's Adjusted Base Initial Margin and the total value of the Clearing Fund.

Clearing Fund Base Deposits

CDCC imposes a minimum base deposit on the amount deposited in the Clearing Fund, which varies according to the Clearing Member's type of activity. This minimum base deposit is set at:

• $25,000 for a Clearing Member trading exchange-traded options
• $75,000 for a Clearing Member trading exchange-traded futures
• $100,000 for a Clearing Member trading over-the-counter instruments (other than fixed income transactions)
• $1,000,000 for a Clearing Member trading over-the-counter fixed income transactions

Clearing Members' Contribution to the Clearing Fund

CDCC issues an amount of Deposit to each Clearing Member on a monthly re-evaluation basis of the following elements:

• The size of the Clearing Fund is based on the largest uncovered residual risk over the last sixty Business Days. The size is then multiplied by 115%.
• The largest uncovered residual risk is determined using both the stress tests results designed to cover extreme but plausible market conditions and the Clearing Member's prefunded financial resources.
• Each Clearing Member's contribution to the Clearing Fund is equal to the weight on his respective Base Initial Margin requirement based on the CDCC Book Positions over the last sixty Business Days multiplied by the size of the Clearing Fund. Clearing Member's contribution is subject to the base deposits.
• CDCC monitors and controls the size of the Clearing Fund throughout the month and may adjust it upward between monthly re-evaluation. If the largest uncovered residual risk exceeds 90% of the size of the Clearing Fund but is inferior to 100% of the size of the Clearing Fund, the size of the Clearing Fund is increased by 15% of the current size. If the largest uncovered residual risk exceeds 100%, the size of the Clearing Fund is updated based on the methodology described above.