Was counterparty risk high enough to worry about for futures exchanges during 2008?

Discussion in 'Risk Management' started by learner88, Dec 12, 2018.

  1. In 2008 financial crisis, almost everyone was scared of counterparty risks in the financial system because even strong banks were falling apart. For futures traders, were there counterparty risks (high enough to worry) that the clearing houses like CME may not be able to pay the shorts for their huge profits in 2008?

    Just wondering how were things like from players who have been around the vicinity for a much longer time than me. Newbies like me can learn from your experience.
  2. Robert Morse

    Robert Morse Sponsor

    When you hold a futures position "over-night" where the SPAN margin is $100,000:

    You have to have $100,000 in equity.
    Your FCM has to put up 8% more or $8000 from their equity.
    If your account were to go below zero, the FCMs balance sheet would get hit next. After that, the CME would have to be there as your counter-party.

    I wish the NFA/CFTC would agree to create a SIPC/FDIC type insurance that would get funded over time to protect small accounts at FCMs but up until now, they do not see the need.
    positive etc likes this.