CME Clearing maintains a $4 billion Financial Safeguards package to guarantee the financial performance of CME Group contracts. The structure of the package mutualizes the risk such that each clearing member is, in part, financially responsible for the performance of the other’s contract obligations.

The mutualization of risk creates incentives for all clearing members to support the imposition of risk controls that limit the extent to which trading activities expose all members to losses from defaults. This alignment of incentives for effective risk management (each firm has skin in the game) is a key to the historical track record at the CME. As a result:

• There has never been a failure of a clearing member firm to meet all of its obligations to CME Clearing
• Never has a failure by a clearing member resulted in the loss of customer funds

Functions of the Financial Safeguards System
Risk management and financial surveillance are the two primary functions of CME Clearing's Financial Safeguards system. The system:

• Is designed to provide the highest level of safety and the early detection of unsound financial practices on the part of any clearing member
• Has a twofold purpose:
  • To avert defaults by any participant in the clearing process
  • To protect all clearing members and their customers from the consequences of any default
• Is continually updated to reflect the most advanced risk management and financial surveillance techniques.
• Is operated by CME Clearing's Risk Management team
• Is directed by senior management from the Audit, Clearing, Finance, Legal, Market Regulation, Risk Management, and executive areas of CME Group.

The financial integrity of CME Clearing is a foremost consideration of CME Group Board of Directors, Clearing House Risk Committee, and management. CME Group is vitally aware of its role in international financial markets and believes that its financial safeguard system, designed for the benefit and protection of both clearing members and their customers, is second to none.

Read complete details on CME Clearing's Financial Safeguards system.