Default Risk
Member’s default risk refers to the risk of not fulfilling settlement by the settlement deadline resulted by the member’s disability of settlement due to deteriorated financial status or bankruptcy. The KRX defines settlement default in the derivatives market as the case when a clearing member does not fulfill the settlement obligation or fails to deposit its margin or when the KRX deems that such a situation can possibly happen.
Case where there is a concern about non-fulfillment of settlement obligations

"Case where a clearing member is deemed to have a risk of not fulfilling of settlement obligations" refer to the below.

Derivatives Market Business Regulation §107②

§107. Measures against Non-fulfillment of Settlement Obligations by Clearing Members, etc.
②The "case where a clearing member fails to perform the settlement or the deposit of the member margins or the intraday margins, or is deemd to have a risk of not fulfilling such obligations" in paragraph ① shall refer to the cases failing under each of the following subparagraphs:

  1. Case where the payment suspension is imposed on the clearing member and the application for commencement of rehabilitation procedures is filed and;
  2. Case where the bill or check issued has been defaulted or the transaction with bank has been suspended;
  3. Case where the business has been suspended by the Financial Services Commission;
  4. In the case of the Korean branch office of foreign investment brokerage company or investment dealing company that is engaged in the business of trading exchanged-traded derivatives, the case where the head office in foreign country comes under the case equivalent to those noted in paragraphs 1 through 3;
  5. Case where a financial fraud or bad loan involving a huge amount has occurred;
  6. Case where the liquidity has declined rapidly; and
  7. In addition, as a case equivalent to the provisions of subparagraphs 1 through 6, the case where there is a concern about non-fulfillment of settlement obligations.
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