This paper, developed by CCP12, EACH, FIA, FIA PTG, ISDA and MFA, and submitted to IOSCO, addresses client participation in CCP default auctions. The paper builds on the Principles for Financial Market Infrastructures (April 2012) (“PFMIs”) and joint CPMI-IOSCO work on CCP resilience and recovery, with the aim of enhancing auction practices and procedures. The paper reflects current practices across the industry, as well as responses to a 2019 CPMI-IOSCO discussion paper. At a high level, the paper recommends that client participation in CCP default auctions should be an option across all asset classes and products. Having a diverse set of qualified participants can result in more competitive bids and increase the odds of having a successful default management auction. Often, clients are the primary liquidity suppliers in a particular asset class or product group. Experience with client participation in CCP default auctions has demonstrated that clients bid aggressively, reducing the overall cost of resolving the default.
