Chapter 04 · Section 4.1

Positions and Risk Flow

• The client's positions are recorded in a position account with his broker.

• The broker in turn, maintains position account with the clearing member who clears his trades.

• Finally, the clearing member maintains a position account with the clearing house.

• The clearing house guarantees all commitments from positions held by its clearing members.

• The clearing house has a risk in holding a short position on behalf of¨its clearing members.

• The clearing members run a risk in holding short positions on behalf of brokers.

• The broker runs a risk in holding positions on behalf of the client.