In the event of a default on one side of a futures trade,
A)the clearing member stands in for the defaulting party.
B)the clearing member will seek restitution for the defaulting party.
C)if the default is on the short side, a randomly selected long contract will not get paid. That party will then have standing to initiate a civil suit against the defaulting short.
D)both a and b

Question

Quizplus · Accepted Answer

When a default occurs in a futures trade, the clearing member is responsible for standing in for the defaulting party and seeking restitution for the losses incurred by the non-defaulting party. Therefore, both options A and B are correct. Option C is incorrect because futures contracts are standardized and not specific to individual buyers or sellers. In the event of a default, every contract is treated equally, and there is no basis for initiating a civil suit against the defaulting party.

In the Event of a Default on One Side of a Futures