International Bodies Seek Public Input on Central Counterparty Auctions Discussion Paper

The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have published a joint discussion paper on central counterparty default management auctions. Comments should be provided by August 9, 2019.

The CPMI and IOSCO consider that the imposition of mandatory clearing has contributed to the increasing importance of CCPs in the financial system. They have, since 2012, been engaged in developing international standards to promote effective risk management procedures in the case of a CCP default. The latest discussion paper reflects the focus of the CPMI and IOSCO on default management auctions, which enable CCPs to transfer a defaulting participant's positions to a non-defaulting participant in the event of a member default (as opposed to a CCP default).

The discussion paper aims to facilitate the sharing of information on existing CCP default management practices and contribute to the discussion on how best to enhance those practices. It is based upon responses received from CCPs on current industry practices in CCP default management. The paper focuses, and seeks public input, on five key areas:
 

1. Governance and the roles and responsibilities of CCP stakeholders (including the board of directors, management and other personnel) in the auction process;
2. Considerations for a successful default management auction, setting out the key elements a CCP considers when planning an auction, which include a hedging strategy, the design of the auction and responses to an unsuccessful auction;
3. Operational considerations (including preparing auction participants, enhancing communication of information and performing testing exercises) that CCPs may address during the "business-as-usual" period in order to prepare for a successful auction;
4. Client participation and the considerations CCPs may take into account when deciding whether to permit client participation in default management auctions; and
5. Default of a common participant across multiple CCPs, the benefits of performing multi-CCP default management exercises and the possibility of CCPs coordinating membership of default management groups to avoid clashes.

Following the consultation period, the CPMI and IOSCO will determine whether to publish a final version of the discussion paper or conduct further consultation.

View the CPMI and IOSCO discussion paper on central counterparty default management auctions.

View the CPMI and IOSCO cover note and link for submitting responses to the consultation.

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