LCH.Clearnet is overhauling the margin model used by SwapClear, its interest rate swap clearing service, after members protested it was not generating big enough collateral calls – resulting in the risk being covered by member contributions to the default fund instead. That is a problem because losses that eat through a defaulting member's initial margin and default fund contribution are shared among the other contributors to the fund – less initial margin means more mutualised risk.
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