IOSCO seeks comment on CCP auctions paper
June 5, 2019

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have today published for public comment a discussion paper on central counterparty default management auctions.

IOSCO notes that 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 standardized OTC (over-the-counter) 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, it adds. A CCP's ability to effectively manage a default is essential to its resilience and can help reduce systemic risk.

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, IOSCO continues.

In response to the public consultation that resulted in the revised report on recovery of financial market infrastructures (2017), CPMI and IOSCO agreed that follow-up work should be conducted in the area of CCPs' default management auctions.

This new paper focusses on five key aspects of a CCP's default management auctions: (i) governance; (ii) considerations for a successful default management auction; (iii) operational considerations; (iv) client participation; and (v) default of a common participant across multiple CCPs.

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, says IOSCO. Comments should be submitted by Friday August 9.  





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The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have today published for public comment a discussion paper on central counterparty default management auctions.

IOSCO notes that 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 standardized OTC (over-the-counter) 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, it adds. A CCP's ability to effectively manage a default is essential to its resilience and can help reduce systemic risk.

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, IOSCO continues.

In response to the public consultation that resulted in the revised report on recovery of financial market infrastructures (2017), CPMI and IOSCO agreed that follow-up work should be conducted in the area of CCPs' default management auctions.

This new paper focusses on five key aspects of a CCP's default management auctions: (i) governance; (ii) considerations for a successful default management auction; (iii) operational considerations; (iv) client participation; and (v) default of a common participant across multiple CCPs.

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, says IOSCO. Comments should be submitted by Friday August 9.  



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