The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) circulated on June 25th a new report entitled “Central counterparty default management auctions – Issues for consideration.” The report, built on a discussion paper published in June 2019, outlines issues that central counterparties (CCPs) should consider regarding default management auctions processes and identifies best practices to ponder in the development and improvement of default management auctions.
In its cover note, CPMI-IOSCO highlighted its intention to “continue engaging the industry on these topics and strongly encourage the industry to collaborate and work on the further development of default management auctions practices […] without imposing additional standards beyond those set out in the PFMI.” Based on the responses by stakeholders to the previous discussion paper, CPMI-IOSCO groups the areas for further industry work into three categories:
- The first category includes several operational issues (such as methods of communication and formats for auction files) 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 (governance of a CCP’s default management process, use of traders in default management groups, the scope of client participation) where there are differing views among clearing members and other stakeholders.
- The third category includes nascent and emerging practices (synchronising default management processes, identification of potential hedges between CCPs) that may require further coordination and harmonisation among the default management processes of multiple CCPs.
CPMI-IOSCO encourages the industry to resolve the issues within the first two categories and to make progress on the third set of issues, over the next twenty-four months. At the end of this period, CPMI-IOSCO will re-evaluate the industry progress and consider whether additional guidance is needed to enhance auction practices and procedures.
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