CPMI and IOSCO issue paper on CCP default management auctions with three categories for follow up

CPMI and IOSCO are today publishing an updated document entitled “Central counterparty default management auctions – Issues for consideration”. The purpose of this document is to provide a more complete description of the issues that a CCP should consider regarding its default management auction processes, and to identify practices that a CCP could consider in their development of, and improvements to, default management auction rules and procedures to address these issues. CPMI-IOSCO will work with industry to progress these issues over the next twenty four months, before taking stock.

CPMI and IOSCO intend to continue engaging the industry on these topics and strongly encourage the industry to collaborate and work on further development of default management auctions practices. Based on the public consultation, CPMI-IOSCO have observed several areas for further industry work, which can be grouped into three categories.

The first category includes several operational issues where there is broad industry consensus to support further development and where CCPs should be well-positioned to advance these issues, bringing such work to closure.

The second category includes areas where there are differing views among clearing members and other stakeholders, on the one hand, and CCPs, on the other. Further substantive discussion amongst stakeholders will be necessary to determine the most appropriate way forward in these areas. In the view of this, CPMI and IOSCO strongly encourage the industry to further consider these topics, to reach consensus on how to address them in a manner that reflects the perspectives of various industry participants, and to develop a plan and timeline for implementation and complete the implementation within the twenty-four month period discussed below.

The third category includes potential nascent and emerging practices that may require further coordination and harmonisation among the default management processes of multiple CCPs. CPMI and IOSCO encourage the industry to further engage and communicate on these issues, and to identify, where possible, solutions to address potential negative externalities associated with these topics. Where necessary and appropriate, CPMI-IOSCO are prepared to facilitate industry discussions to progress and resolve these issues.

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