MFA and SIFMA AMG Joint Letter to CPMI-IOSCO on CCP Default Management Auctions

On August 9, MFA and SIFMA AMG jointly submitted a comment letter to the Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) in response to their joint discussion paper on central counterparty (CCP) default management auctions.  In our joint letter, the Associations emphasize that CCPs should have default management processes that include clients as part of auctions and CCP governance, and urge CPMI and IOSCO to recommend such inclusion.  In support of this position, we explain that client participation in a CCP auction is critical to the auction’s success because (1) client incentives are aligned, (2) it is important to the auction’s success to have participant diversity, (3) it is important to have high auction demand, and (4) it is important to have more sources of private capital available.  Lastly, the Discussion Paper refers to certain considerations for client participation in auctions, including liability of clearing member, incentives to bid competitively, legal readiness, operational readiness, and information leakage.  In our joint letter, the Associations address each of these considerations and rebut the presumption that any of these considerations support exclusion of client from auction participation.