The sequence of use of the settlement resources in case of a default by a clearing member is as follows:
< Sequence of Use of Settlement Resources >
  1. Assets of the Default Member
    Assets of the default member
    In case of a default, the clearing margin of the default member or the deposited assets of clearing members such as money or securities which are supposed to be paid to the default member by the Exchange are used in the foremost order in advance of any other. After then, the default member’s contribution to the OTC Derivatives JCF is used.
  2. CCP Settlement Reserve (Junior tranche)
    CCP settlement reserve
    In case where the assets of the default member are used up, 50% of the KRX settlement reserve is used prior to the use of the non-default members’ contribution to the JCF.
  3. Non-default Members’ Joint Compensation Fund
    Non-default member’s contribution to the OTC Derivatives JCF
    In case where the loss is still left, then, the contribution by the non-default members to the JCF is used. In this case, for prompt and fair conducting of the auction, the order of the use of the contribution by each non-default member is differentiated according to the participation degree in the auction. Firstly, the contributions of non-default members who have not participated in the auction are used, followed by the contributions of non-default members who have participated in the auction but failed to win the auction. Finally, the contributions of non-default members who have participated in the auction to win are used.
  4. CCP Settlement Reserve (Senior tranche)
    CCP settlement reserve
    In case where all the Joint Compensation Fund contributions are used up, then the remainder of the KRX settlement reserve is used.
  5. Additional Contribution to the Joint Compensation Fund
    Additional contribution
    In case where there is loss still left, additional contributions are collected from the non-default members up to the amount that the members had already contributed.
  6. Additional Contributions by Members Receiving Net Settlement Amount
    Additional contributions by members receiving net settlement fund
    In case where the loss is still left ever after the additional contributions by the non-default members, then the CCP may request, for a certain period, the members who have more receivable net settlement amount than payable net settlement amount to make additional contributions within the amount of the net receivable.
  7. Voluntary Contributions by Clearing Members
    Voluntary additional contributions by clearing members
    If there is loss still left unpaid even after the use of the additional contributions by members receiving net settlement amount, voluntary contributions by clearing members may be used.
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  • OTC Clearing & Settlement Operations 051-662-2767