Answer-first summary for fast verification
Answer: Non-clearing member (aka, "C" for clients) will contribute to the CCP default fund but will not be required to post margin
### Correct answer: B The false statement is that non-clearing members (clients) would **contribute to the CCP default fund but not post margin**. #### Why B is false 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. #### Why the other statements are true - **A:** The dotted lines in Gregory's illustration indicate bilateral trades that are not centrally cleared. - **C:** Clients commonly maintain relationships with more than one clearing member to gain access, flexibility, and redundancy. - **D:** Clients can clear through a clearing member using either a **principal-to-principal** or **agency** model. ### Key takeaway 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.
Author: Manit Arora
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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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