A discussion paper on central counterparty default management auctions

CPMI Papers  |  No 185  | 
05 June 2019
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 |  30 pages

Central counterparties (CCPs) have become increasingly critical components of the financial system in recent years, due in part to the introduction of mandatory clearing for standardised OTC derivatives in some jurisdictions. Consistent with the key responsibility of guaranteeing the fulfilment of transactions to their clearing participants, CCPs play an important role in mitigating contagion in the event of a participant default. A default management auction is one of the tools that a CCP may use to transfer a defaulting participant's positions to a non-defaulting participant, thereby restoring the CCP to a matched book.

This CPMI and IOSCO discussion paper focuses on five key aspects of a CCP's default management auctions. It aims to facilitate the sharing of existing practices and views on default management auctions, and to foster dialogue on the key concepts, processes and operational aspects used by CCPs in planning and executing effective default management auctions. Additionally, the discussion paper identifies certain considerations that may be useful for CCPs to take into account when planning for auctions.

The discussion paper seeks general and specific comments and suggestions from respondents by 9 August 2019. Comments should be submitted here by Friday 9 August 2019.

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