CNS Default Fund

The CNS Default Fund is designed to cover a residual portion of the CNS service losses with CNS participants' resources through a pooling‐of‐resources arrangement. The CNS Default Fund is sized to have resources sufficient to cover a wide range of potential stress scenarios that should include, but not be limited to, the default of a participant and its affiliates that would potentially cause the largest aggregate credit exposure for the CNS service in extreme but plausible market conditions.

The CNS Default Fund consists of two tiers, and it is structured to mitigate the largest daily residual stress-test loss under extreme but plausible market conditions of all CNS Participants and their affiliate(s):

• The size of the Tier 1 component is based on the largest Non-Triple Witching residual stress-test loss, over a one-year lookback.
• The size of the Tier 2 component is based on the largest Triple Witching residual stress-test loss attributed to those CNS participants whose settlement activity have demonstrated spikes during the four Triple Witching settlement days over a one-year lookback.

CNS Participants' Contribution to the CNS Default Fund

• Each CNS Participant's contribution to the CNS Default Fund is equal to a pro-rata share of their cumulative Base IM over a one-year lookback, for those business days associated with either of Tier 1 or Tier 2 activity.
• CDS monitors the size of the CNS Default Fund intra-month and may adjust it upward between each monthly re-evaluation. In the event that an intra‐month residual stress‐test loss (in either the non‐Triple Witching or Triple Witching days) exceeds the Tier 1 and/or Tier 2 residual stress losses used to size of the CNS Default Fund, CDS will make an intra‐month collateral call against both Tier 1 and Tier 2 CNS Participants.

For more details on how CDS computes its CNS Default Fund collateral requirements, please refer to the CDS Financial Risk Model.