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Thursday, June 06, 2018 08:20 AM / IOSCO |
The Committee on Payments and Market
Infrastructures (CPMI) and the International Organization of Securities
Commissions (IOSCO) today published for public comment
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 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. In
response to the public consultation that resulted in the revised report on Recovery of financial market infrastructures. (2017), CPMI-IOSCO agreed that
follow-up work should be conducted in the area of CCPs’ default management
auctions
This discussion paper focuses 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.
Published with this report is a cover note listing
some of the specific issues on which the CPMI and IOSCO are soliciting input.
Comments should be submitted by Friday 9 August 2019 using the link
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