Clearing overview - CCP

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Cash margin: Note that it is legally impossible to separate possession and ownership of cash. Any person holding cash is, against all other persons in the world, its outright owner: a payee can therefore assume a payer has good title to any cash it pays. This guarantees commercial certainty for cash and preserves its status as an abstract token of value and not an asset.

Non-cash/Securities margin: securities are not an abstract token of value but a representation of a financial right to or over something. It is possible to hold a security without being its owner, and deliver a security to another person without. This means that, unlike cash, one can hold a non-cash asset as a fiduciary on behalf of another person.

intermediaries


Margin Type Transfer Type Client Risk

(Broker)

Client Risk

(Bank/Custodian)

Client Risk

(Intermediary)

Broker Risk

(Bank/Custodian)

Broker Risk

(Intermediary)

Cash Outright transfer Yes No - it's the Broker's bank. Depends on limited recourse Yes Depends on limited recourse
Cash Client money No Yes – it is client’s bank Generally Yes but limited recourse language will help No Generally Yes but limited recourse language will help
Securities Outright transfer Yes No - it's a custody asset. Yes, if limited recourse No No
Securities Pledge No, unless a right of rehypothecation, in which case Yes. No If re-pledged: No. If rehypothecated: Depends on limited recourse. No Depends on limited recourse.