Explanation:
The false statement is that non-clearing members (clients) would contribute to the CCP default fund but not post margin.
In client clearing arrangements, clients generally do post margin (typically to the clearing member, who then posts to the CCP). However, clients are not usually direct contributors to the CCP default fund in the way clearing members are.
In central clearing, the important distinction is between clearing members, who are direct CCP participants and default fund contributors, and clients, who typically clear indirectly through a clearing member and post margin but do not directly join the CCP as members.
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Q-604.2. To the right, is Gregory's illustration of a centrally clearing market [Gregory Figure 3.6]. About this market, each of the following is true EXCEPT which is false:
A
The dotted lines represent non-cleared bilateral trades between members ("D" for dealers)
B
Non-clearing member (aka, "C" for clients) will contribute to the CCP default fund but will not be required to post margin
C
Non-clearing members (aka, "C" for clients) are likely to have relationships with more than one clearing member ("D" for dealers)
D
Non-clearing members (aka, "C" for clients) can clear through a member ("D" for dealer) vis a principal-to-principal or agency method
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