The Committee on Payments and Market Infrastructures and IOSCO (collectively, "CPMI-IOSCO") recommended practices that central counterparties ("CCPs") might consider in "the development of, and improvements to, default management auction rules, governance arrangements" and related procedures.

In the report, CMPI-IOSCO recommended, among other things, that CCPs:

  • clarify the roles and responsibilities of personnel involved in an auction process;
  • address key elements of designing an auction process (e.g., the portfolio structure and auction format, auction participation, and requirements that must be met to be able to participate);
  • take certain steps under "business-as-usual" conditions to prepare for a successful auction;
  • determine whether to allow (direct or indirect) client participation; and
  • be able to mitigate issues among CCPs that are holding concurrent auctions (particularly in the context of defaults by entities that are members of more than one CCP).

Based on a June 2019 public consultation, CPMI-IOSCO identified three areas for further work: (1) operational issues, such as means of communication and formats for auction files; (2) topics subject to "differing views," including CCP governance for default management processes, the role of traders in default management groups and the scope of client participants; and (3) practices emerging within the industry that may require additional coordination among CCPs.

Primary Sources

  1. IOSCO Report: Central Counterparty Default Management Auctions-Issues for Consideration
  2. IOSCO Press Release: CPMI-IOSCO Publish a Report on CCP Auctions

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