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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.
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.
Comments should be submitted by Friday 9 August 2019.