Default Risk Management Working Group

 

Uniform CCP Terminology for 

Default Management Auctions

Final Version 

4/1/2016 
 April 1, 2016

Page 1 

1 INTRODUCTION ......................................................................................................................... 3

2 BACKGROUND .......................................................................................................................... 4

2.1 ACADEMIC LITERATURE .......................................................................................................................................... 4

2.2 BIDDING FORMATS ................................................................................................................................................. 5

2.3 SINGLE UNIT AUCTIONS ......................................................................................................................................... 5

2.4 MULTI-UNIT AUCTIONS ......................................................................................................................................... 7

2.5 MULTI-ASSET AUCTIONS ........................................................................................................................................ 9

2.6 AUCTION LIFECYCLE ............................................................................................................................................ 10

3 STANDARD TERMINOLOGY AND CONVENTIONS ................................................................... 13

3.1 ACADEMIC REFERENCES TO AUCTION MECHANISMS .............................................................................................. 13

3.1.1 Sealed Bid ..................................................................................................................................................... 13

3.1.2 Single Unit .................................................................................................................................................... 13

3.1.3 Multi Unit ..................................................................................................................................................... 13

3.1.4 Multi Asset .................................................................................................................................................... 13

3.1.5 First Price ..................................................................................................................................................... 13

3.1.6 Second Price ................................................................................................................................................. 14

3.1.7 Discriminatory Price ..................................................................................................................................... 14

3.1.8 Uniform Price ................................................................................................................................................ 14

3.1.9 Lowest Accepted Price ................................................................................................................................... 14

3.1.10 Highest Rejected Price ................................................................................................................................. 14

3.2 CCP AUCTION TYPES ............................................................................................................................................ 14

3.2.1 Single Unit Pay Your Price ............................................................................................................................ 15

3.2.2 Multi-Unit Pay Your Price ............................................................................................................................. 15

3.2.3 Modified Dutch .............................................................................................................................................. 15

3.2.4 Selective Bidding ........................................................................................................................................... 15

3.3 REFERENCES TO GROUPS OF POSITIONS ................................................................................................................ 18

3.3.1 Defaulter’s Portfolio ...................................................................................................................................... 18

3.3.2 Auction Portfolio ........................................................................................................................................... 18

3.3.3 Offered Package ............................................................................................................................................ 18

3.4 BIDS AND BID CONSTRUCTION .............................................................................................................................. 20

3.4.1 Bidding Package ............................................................................................................................................ 21

3.4.2 Bid Size ......................................................................................................................................................... 21

3.4.3 Price or Level ................................................................................................................................................ 21

3.4.4 Settlement Method ......................................................................................................................................... 22

3.4.5 Capital Considerations .................................................................................................................................. 22

3.5 CONSTRAINTS AND REQUIREMENTS ...................................................................................................................... 24

3.5.1 Auction Currency ........................................................................................................................................... 24

3.5.2 Bid Size Increment ......................................................................................................................................... 24

3.5.3 Minimum Bid Size .......................................................................................................................................... 24

3.5.4 Minimum Bid Requirement ............................................................................................................................. 24

3.5.5 Price Increment ............................................................................................................................................. 25

3.5.6 Reserve Price ................................................................................................................................................ 25

3.5.7 Maximum Price ............................................................................................................................................. 25

3.6 AWARDS .............................................................................................................................................................. 26

3.6.1 Auction Award ............................................................................................................................................... 26

3.6.2 Awarded Portfolio ......................................................................................................................................... 26

3.6.3 Invoice Amount .............................................................................................................................................. 26

3.6.4 Clearing Price ............................................................................................................................................... 26
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3.7 LIFECYCLE ........................................................................................................................................................... 27

3.7.1 Summary Auction Specification ...................................................................................................................... 27

3.7.2 Publication Time ........................................................................................................................................... 27

3.7.3 Bidding Open ................................................................................................................................................ 27

3.7.4 Bidding Close ................................................................................................................................................ 27

3.7.5 Bidding Extension Period (optional) ............................................................................................................... 27

3.7.6 Expected Auction Completion Time (optional) ................................................................................................. 27

3.7.7 Bid Expiration Time ....................................................................................................................................... 27

3.8 SUMMARY AUCTION SPECIFICATION TEMPLATE .................................................................................................... 28

4 BIBLIOGRAPHY ....................................................................................................................... 32
 April 1, 2016

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1 Introduction 

In July of 2015, a group of eight central counterparty clearinghouse (CCP) operators, representing over 

15 CCPs, formed a Default Risk Management Working Group (DRMWG), with the aim of fostering 

cooperation and coordination among CCPs in the preparation for and management of a clearing member 

default. This document is a product of the DRMWG, related to its Core Principle 5, which states “CCPs 

should coordinate to standardize auction processes, including auction formats and auction types, and to 

avoid creation of any structural impediments to the universe of potential auction participants.” A key 

component of auction standardization is the utilization of common terminology and conventions. The 

goal of this document is to establish common terminology and conventions across CCPs, so that the 

market participants in CCP default management (DM) auctions find it easier to understand the rules and 

conventions of each auction in which they take part, which will lead to more-effective auctions. 

Establishing common terminology and conventions is intended to minimize errors by auction 

participants and improve communications between CCPs during any default management related 

cooperation. 

This document is designed to achieve this goal by: 

 Presenting and naming the four Standard CCP Auction Types currently used by DRMWG 

members; 

 Establishing a common vocabulary of auction terminology and standardizing bidding 

conventions; 

 Providing a template in a standardized format that may be used by any CCP to communicate 

the auction specific parameters in concise and efficient manner to potential auction 

participants. 

Section 2 presents the general types of auction contemplated in academic literature and defines common 

academic terms. Section 3 defines the DRMWG standard CCP terminology and conventions and Table 9 

provides the template for Summary Auction Specifications. 

For the avoidance of doubt, it is not the goal of this document, or the DRMWG, to standardize auction 

types, rules or DM procedures in general, across CCPs. It is also not the goal of this document to 

provide discussion of the purpose, strengths or weaknesses of any of the presented auction types. Rather, 

the goal of this document is to provide a standardized terminology and conventions. 

The success of this document in achieving its goal relies on CCPs consistently adopting presented 

terminology and conventions when interacting with stakeholders in relation to default management 

auctions via verbal, written or system communications. The following CCPs worked collaboratively in 

order to develop the main principles presented in this document: 
 April 1, 2016

Page 4 

 CME Group 

 Eurex Clearing AG 

 Intercontinental Exchange 

 The Depository Trust and Clearing Corporation 

 The Minneapolis Grain Exchange Clearing House 

 The Options Clearing Corporation 

 Nasdaq 

 The London Metal Exchange 

2 Background 

2.1 Academic Literature 

There are many academic papers on the theory of auctions, many based on the seminal contributions 

from William Vickrey (Vickrey, 1961), Edward Clarke (Clarke, 1971), and Theodore Groves (Groves, 

1973). There have been a number of important and well documented auctions, notably the 2008 auction 

by the Federal Communications Commission (FCC) for the rights to operate the 700 MHz radio 

frequency band in the United States (S Brusco, 2009), and the ongoing auctioning of U.S. Treasury 

securities (Nandi, 1997). 

In its most general form, an auction is a market mechanism to allocate assets among a group of bidders. 

The mechanism defines permitted actions for participants and the rules for determining the assets 

allocated to each bidder and the associated payments. The mechanism designer sets the rules to achieve 

a specific objective, such as maximizing the seller’s proceeds and/or maximizing the likelihood of 

allocating all assets. Auctions are especially important in environments in which it is difficult to set a 

market price (e.g. in time of a large clearing member default) because they can act as an efficient pricediscovery mechanisms. The designs of many auction mechanisms are based on seminal contributions 

from William Vickrey (Vickrey, 1961), Edward Clarke (Clarke, 1971), and Theodore Groves (Groves, 

1973). Vickrey designed auction mechanisms that allocate resources efficiently in a wide range of 

circumstances. Clarke and Groves generalized Vikrey’s approach and analyzed auction mechanisms 

elements that make truthful bidding consistent with individual bidder’s interests. Many texts, such as the 

one published by the pioneer of spectrum auction design (Milgrom, 2004) provide an overview of 

modern auction theory, which has evolved rapidly since technology advances, such as the internet, have 

made more elaborate designs practical. 

 
 April 1, 2016

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2.2 Bidding Formats 

Auctions are either open or sealed bid. 

In an open auction, the auctioneer shares information related to the bids provided by auction participants 

during the bidding process. A common example of an open auction is the ascending open-outcry 

auction, in which the auctioneer accepts increasingly higher bids from the auction participants until no 

auction participant is willing to submit a higher bid, at which point they sell the item to the highest 

bidder at a price equal to the highest bidder’s bid. 

In a sealed-bid auction, auction participants privately submit their bids to the auctioneer and the 

auctioneer keeps this information private, such that there is no sharing of bidding information amongst 

auction participants. Auction participants are only informed whether they have won or lost, and whether 

the auction failed to award 100% of the assets. 

As a general rule, all DRMWG members use sealed-bid auction formats. 

2.3 Single Unit Auctions 

In a single unit sealed bid auction, only one item is available for sale and there is only one winner for the 

item. Auction participants bid a price at which they are willing to assume the item available for sale. 1,

2

The winner is the auction participant bidding the highest price. As shown in Figure 1, in the first price 

version of this type of auction, the winning auction participant pays his or her own price. In the second 

price version of this type of auction, the winning auction participant pays the price of the participant 

submitting the second-highest bid. 

The application of a single unit auction to a portfolio of positions is straightforward. Each auction 

participant bids the maximum price they are willing to pay to take ownership of the entire portfolio, and 

the auctioneer transfers ownership of the entire portfolio to the winning auction participant, as illustrated 

in Figure 2. 

 

1 For the avoidance of doubt, prices provided in a Default Management Auction can be either positive, indicating 

an amount paid by the auction participant to the CCP, or negative, indicating an amount paid by the CCP to the 

auction participant. 

2 In cases in which there are multiple auction participants that provide the same winning price, CCPs will follow 

their, previously communicated, tie breaking procedures in awarding the item available for sale. 
 April 1, 2016

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FIGURE 1: FIRST AND SECOND PRICE VARIATIONS OF THE SINGLE UNIT SEALED BID AUCTION

FIGURE 2: ILLUSTRATION OF SINGLE UNIT BIDDING FOR A PORTFOLIO OF POSITIONS

Single Unit Auction

• Only one item is available for sale

• Auction participants bid the maximum price 

they are willing to pay for the item

First Price

• The auction participant 

submitting the highest 

price wins and pays his 

or her own price

• The auction participant 

submitting the highest 

price wins and pays the 

price of the participant 

submitting the secondhighest price

Second Price
 April 1, 2016

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2.4 Multi-Unit Auctions 

In a multi-unit auction, multiple identical items are available for sale. Bids consist of a price per item an 

auction participant is willing to pay or receive for a given number of items. Two variants of the multiunit auction are the discriminatory price multi-unit auction and the uniform price multi-unit auction, as 

illustrated in Figure 3. 

In the discriminatory price multi-unit auction, the auctioneer sells the identical items at different prices 

to different winning auction participants. The auctioneer accepts all highest prices until the order is filled 

and awards based on highest to lowest of winning bids. In a discriminatory first price multi-unit 

auction, the auction participants submitting the highest prices win the number of items they bid for, and 

pay their own bid prices. In a discriminatory second price multi-unit auction, the winning auction 

participants pay the price submitted by the next-highest bidder. 

In the uniform price version of the multi-unit auction, the auctioneer sells the identical items at the same 

price to all winning auction participants. In a uniform lowest accepted price multi-unit auction, the 

auction participants submitting the highest prices win the number of items they bid for and pay the 

lowest price of all winning auction participants. In a uniform highest rejected price multi-unit auction, 

the winning auction participants pay the highest price of all non-winning auction participants. 

Figure 4 illustrates the application of a multi-unit auction to a portfolio of positions. Each auction 

participant bids for a “slice” (in terms of the percentage of the notional amount or number of contracts) 

they wish to take ownership of. Winning auction participants receive the “slice” of the portfolio on 

which they bid. 3

 

3 In cases in which there are multiple auction participants that provide the same winning price, CCPs will follow 

their, previously communicated, tie breaking procedures in awarding the slice(s) of the portfolio. 
 April 1, 2016

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FIGURE 3: DISCRIMINATORYAND UNIFORM PRICE VERSIONS OF THE MULTI UNIT SEALED BID AUCTION

FIGURE 4: ILLUSTRATION OF MULTI-UNIT BIDDING FOR A PORTFOLIO OF POSITIONS

Multi Unit Auction

• Multiple identical items are available for sale

• Bids consists of the maximum price per item an 

auction participant is willing to pay to receive a 

given number of items

Discriminatory Price

• Items are sold at different 

prices to different winning 

bidders

First Price

• The auction participants 

submitting the highest prices 

win the number of items they 

bid for, and pay their own price

Second Price

• The auction participants 

submitting the highest prices 

win the number of items they 

bid for, and pay the price of the 

auction participant submitting 

the next highest price

Uniform Price

• All items are sold at the same 

price to all winning bidders

Lowest Accepted Price

• All winning auction 

participants win the number of 

items they bid for at the lowest 

price of all winning auction 

participants

Highest Rejected Price

• All winning auction 

participants win the number of 

items they bid for at the 

highest price of all nonwinning auction participants
 April 1, 2016

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2.5 Multi-Asset Auctions4

In a multi-asset auction, multiple non-identical items are available for sale, and auction participants bid 

for different combinations of the non-identical items. The auctioneer creates groups of the non-identical 

items, called “offered packages”. Auction participants may bid on combinations of the offered packages 

and the auctioneer may place constraints on the valid combinations of offered packages available for 

bidding. A bidding package is the combination of offered packages selected by an auction participant for 

one of its submitted bids. 

Figure 5 illustrates the application of a multi-asset auction to a portfolio of positions. The auctioneer 

divides the auction portfolio into multiple separate groups of positions to form the offered packages A, 

B and C. The auctioneer sets the rules for which combinations of A, B and/or C represent valid bidding 

packages. For example, valid biding packages may be defined as A only, B only, C only, and A, B and C 

jointly. Each auction participant bids the maximum price they are willing to pay to take ownership of a 

given, valid bidding package. The auctioneer establishes rules for deciding which auction participants 

receive which offered packages at what price, based on all received bids across different combinations 

of bidding package. 

One example of the use of multi-asset auctions by the DRMWG CCPs is to provide auction participants 

the ability to bid on an auction portfolio but exclude specific line items that represent undesired or 

prohibited instruments. In this case, every line item is effectively an offered package, and the participant 

creates a custom bidding package by submitting a bid for the original offered package minus any 

identified line items for exclusion. CCPs may place limitations on exclusions (i.e. all derivatives related 

to an underlying, or a particular product type) in order to prevent “cherry picking.” The auctioneer 

establishes the algorithm for selecting which auction participants receive which offered packages (line 

items) and at what price, based on the bids received containing different line item exclusions. 

Another example of the use of multi-asset auctions by the DRMWG CCPs is to provide auction 

participants the ability to bid on either the positions cleared by the defaulting clearing member, the 

collateral posted by the defaulted clearing member, or both the positions cleared and the collateral 

posted by the clearing member. In this case the offered packages are A) cleared positions and B) 

collateral, and the valid bidding packages are A, B, or A and B. Based on this combinatorial bidding, the 

auctioneer establishes the algorithm for selecting which auction participant receives offered package A 

and at what price, and which auction participant receives offered package B and at what price. 

 

4

 In the academic literature, these auctions are referred to as multi-good auctions. 
 April 1, 2016

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FIGURE 5: ILLUSTRATION OF A MULTI-ASSET AUCTION FOR A PORTFOLIO OF POSITIONS

2.6 Auction Lifecycle 

All auctions run by DRMWG CCPs incorporate a similar sequence of activities and information 

exchange. Figure 6 illustrates a generalized auction lifecycle, which describes all DRMWG auctions. 

The CCP must first establish which clearing members, their customers, if any, and non-clearing 

members, if any, it will invite to participate in a given auction. CCP Rules typically provide for auctions 

in which clearing members are required to participate (Mandatory Auctions), and/or auctions in which 

clearing members may optionally participate (Voluntary Auctions). Some CCP Rules allow for clearing 

members to bid on behalf of their customers (Indirect Participating Customers), for the participation of 

customers directly in the auction (Direct Participating Customers), and/or for the participation of CCP 

members that the CCP has not authorized to clear with them. 

If non-clearing members or non-member customers wish to be auction participants (Non-Clearing 

Auction Participants), they typically must first establish a clearing relationship with one or more 

clearing members and obtain pre-approval from those clearing members, such that the clearing members 

commit to clear positions awarded to the Non-Clearing Auction Participants. Figure 6 shows this step as 

“Non-Member Auction Participant Pre-Approval”, which may take place as part of the normal course of 

business, ahead of any potential default. As part of these activities, the clearing member on-boards the 

Non-Clearing Auction Participant such that all required systems integrations, legal agreements, training 

activities, etc. are complete. 

As an additional step, some CCPs may disclose high-level characteristics of the auction portfolio to the 

clearing members and customers and solicit their interest to participate in the auction. 

A

B

C

Bids are accepted on valid combinations of Offered 

Package A, B and/or C

Auction 

Portfolio

Offered 

Packages
 April 1, 2016

Page 11 

Once the CCP has identified the potential auction participants, it announces details of the upcoming 

auction to this group so that they can prepare. Figure 6 shows this step as “Notification”. During the 

Notification period, the CCP provides all potential auction participants with a summary auction 

specification and any other required information related to the upcoming auction. The summary auction 

specification includes the date and time at which the CCP will distribute the auction portfolio to auction 

participants, the date and time at which the CCP begins accepting bids, the date and time at which the 

CCP stops accepting bids, and the estimated date and time at which the CCP will have communicated all 

awards and related cash flows, and distributed an auction complete communication to all auction 

participants. 

During the Notification and Portfolio Review periods, clearing members may require time to perform 

supplementary risk checks before approving Non-Clearing Auction Participants for participation in the 

given auction. The supplementary risk checks may require information contained in the Summary 

Auction Specifications, in which case the clearing member may be able to complete its supplementary 

risk checks during the Notification period. In instances where supplementary risk checks require 

knowledge of the specific auction portfolio, the clearing member may perform supplementary risk 

checks during the Portfolio Review period or Bidding Window. It is important to Non-Clearing Auction 

Participants that clearing members perform supplementary risk checks as quickly as possible, since the 

time it takes the relevant clearing member to perform these checks can reduce the effective duration of 

the Portfolio Review period or Bidding Window for non-clearing members. 

After the auction is complete, the CCP books any awarded positions and effects any payments to/from 

auction participants receiving awards. Figure 6 shows these activities occur during the Award Booking 

period. 
 April 1, 2016

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FIGURE 6: ILLUSTRATION OF COMMON ELEMENTS IN THE LIFECYCLE OF A CCP DEFAULT MANAGEMENT AUCTION Auction Participant Pre-Approval Notification Portfolio Review Bidding Award Determination/ Notification Provide details of up- coming auction to potential / known auction participants Publish the auction portfolio to known / approved auction participants, and provide time for them to review and price the portfolio Accept bids for the auction Determine Awards, Awarded Portfolios and Cash Flows Book Awarded Portfolios to appropriate accounts and effect payment to/from the auction participants receiving awards

 Summary Auction 

Specifications

 Auction Portfolio

 Bids

 Awarded Portfolio 

and associated cash flows

 Auction Complete 

Communication

Ensure appropriate onboarding is complete and agreements are in place between non-members wishing to participate, members willing to clear positions awarded to the non-members, and the CCP

Bidding Open Bidding Close Publication Completion

Award

Booking

Activities Information

Exchange

Members agreeing to clear non-member awards may require a final approval after the CCP publishes Auction Specifications, or after the Auction Portfolio is made availableThe CCP should not make the Auction Portfolio available to non-members until final approval is provided by the member and CCP

Non-Clearing Auction Participant 

Supplementary Risk Checks
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3 Standard Terminology and Conventions 

3.1 Academic References to Auction Mechanisms 

Table 1 defines the commonly used terms for describing auction mechanisms. These common terms are 

primarily to facilitate the definition of the standard CCP auction types in Section 3.2. Given the various 

alternative terminology in academic literature, it is beneficial to define a standard terminology used by 

CCPs during discussions with their stakeholders. 

TABLE 1: STANDARD TERMINOLOGY FOR DESCRIBING AUCTION MECHANISMS

Term Description / Comments 

3.1.1 Sealed Bid  Any auction mechanism where auction participants share their bids with only the 

auctioneer and the auctioneer makes no information related to its received bids 

available to auction participants 

3.1.2 Single Unit 

 General definition 

 Any auction mechanism where only one item is available for sale 

Definition in the context of a default management auction 

 Any auction mechanism in which the auction participants bid for the entire portfolio 

being auctioned 

3.1.3 Multi Unit 

General definition 

 Any auction mechanism where multiple identical items are available for sale 

Definition in the context of a default management auction 

 Any auction mechanism in which auction participants bid for a percentage of the size 

(e.g., notional amount or number of contracts) or portfolio units of all positions in the 

portfolio being auctioned 

3.1.4 Multi Asset 

General definition 

 Any auction mechanism where multiple non-identical items are available for sale and 

auction participants bid for different combinations of the non-identical items 

Definition in the context of a default management auction 

 Any auction mechanism in which the CCP divides the portfolio being auctioned into 

multiple groups of positions, and auction participants are allowed to submit bids for 

different combinations of the defined groups, at the discretion of the auction 

participants, within certain combinatorial bidding rules defined by the CCP 

3.1.5 First Price  A method for determining the price paid by a winning auction participant, in which 

that winning auction participant pays its own bid price 
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Term Description / Comments 

3.1.6 Second Price  A method for determining the price paid by a winning auction participant, in which 

that winning auction participant pays the next lower bid price to its own bid price 

3.1.7 Discriminatory Price  A Multi-Unit auction in which the price paid by the various winning auction 

participants can be different for different auction winners 

 Common Discriminatory Price auctions use the First Price or Second Price method of 

determining the price paid by winning auction participants 

3.1.8 Uniform Price  A Multi-Unit auction in which the same price is paid by all winning auction 

participants 

 Common Uniform Price auctions use the Lowest Accepted Price or Highest Rejected 

Price method for determining the price paid by winning auction participants 

3.1.9 Lowest Accepted Price  A method for determining the price paid by all winning auction participants in a 

Uniform Price auction, in which the lowest price bid by a winning auction participant 

is used as the price for all winning auction participants 

3.1.10 Highest Rejected Price  A method for determining the price paid by all winning auction participants in a 

Uniform Price auction, in which the highest price bid by a non-winning auction 

participant is used as the price for all winning auction participants 

3.2 CCP Auction Types 

All default management auction mechanism presented by the CCPs in the DRMWG fall into one of four 

types of auctions defined in Table 2 and illustrated in Figure 7. The DRMWG is recommending a short 

name for each of the four types of auction as set forth in Table 2. 
 April 1, 2016

Page 15 

TABLE 2: STANDARD CCP AUCTION TYPES

Term Description / Comments

3.2.1 Single Unit Pay Your Price  Single Unit, First Price, Sealed Bid auction, also commonly referred to 

as a Winner Takes All auction. See Fig. 8.

3.2.2 Multi-Unit Pay Your Price  Multi-Unit, Discriminatory First Price, Sealed Bid auction. See Fig 9.

3.2.3 Modified Dutch  Multi-Unit, Uniform Lowest Accepted Price, Sealed Bid auction. See 

Fig 10.

3.2.4 Selective Bidding  Multi-Asset, First Price, Sealed Bid auction. 

 This type of auction has several variants within the DRMWG CCPs 

- Different CCPs have different strategies for splitting the portfolio 

being auctioned into different offered packages, and different rules 

for the valid combinations of offered packagers on which CCPs 

may bid 

- Different CCPs also have different methodologies for determining 

which auction participants are the winners of each offered package, 

given the bids received for different combinations of offered 

package 

 All variants share the feature that, whichever auction participant is 

selected as the winner of a given combination of offered packages on 

which that auction participant bids, pays the price that auction 

participant bid for that combination of offered packages 

 The Selective Bidding auctions used by the DRMWG CCPs include 

the following common variants: 

- The CCP provides the auction participants with a small number of 

mutually exclusive offered packages. An auction participant may 

bid on any individual offered package or on all offered packages 

together. Winning auction participants receive the combination of 

offered packages they bid on at the price they bid for that 

combination of offered packages. 

- The CCP provides the auction participants with the portfolio it 

wishes to sell. An auction participant bids on the entire portfolio 

excluding any number of instruments it indicates with its bid. 

Winning auction participants receive the portfolio without their 

excluded positions, for the price they bid for the portfolio without 

these excluded positions. 
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FIGURE 7: FOUR STANDARD CCP AUCTION TYPES (ANY AUCTION TYPE DISCUSSED AT THE 

DRMWG FALL INTO ONE OF THESE CATEGORIES) 

CCP 

Auction 

Types

Single Unit 

Pay Your Price

Selective Bidding

Modified Dutch

Multi-Unit 

Pay Your Price

• Single Unit

• First Price

• Sealed Bid

• Multi-Unit

• Discriminatory Price (First Price)

• Sealed Bid

• Single Unit

• First Price

• Sealed Bid

• Various Offered Package strategies 

and Bidding Package rules

• Multi-Unit

• Uniform Price (Lowest Accepted Price)

• Sealed Bid

Shorthand Names Auction Mechanisms
 April 1, 2016

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FIGURE 8: EXAMPLE OF A SINGLE UNIT PAY YOUR PRICE AUCTION

FIGURE 9: EXAMPLE OF A MULTI-UNIT PAY YOUR PRICE AUCTION

FIGURE 10: EXAMPLE OF A MODIFIED DUTCH AUCTION

Participant Price per 100%

CCP Pay /

Receive

Participant

Award

Cumulative

Awards

Invoice

Amount

CCP

Pay/Receive

A 3,000,000         CCP Receives 100.0% 100.0% 3,000,000       CCP Receives

B 2,000,000         CCP Receives

C (1,000,000)        CCP Pays

D (1,250,000)        CCP Pays

E (2,000,000)        CCP Pays

F (2,500,000)        CCP Pays

G (3,000,000)        CCP Pays

H (5,000,000)        CCP Pays

I (50,000,000)      CCP Pays

Total 3,000,000       CCP Receives

BID AWARDS

Participant Size

Price per

given Size

Price per

100%

CCP Pay /

Receive

Participant

Award

Cumulative

Awards

Invoice

Amount

CCP

Pay/Receive

A 15.0% 450,000               3,000,000 CCP Receives 15.0% 15.0% 450,000          CCP Receives

B 15.0% 300,000               2,000,000 CCP Receives 15.0% 30.0% 300,000          CCP Receives

C 15.0% (150,000)             (1,000,000) CCP Pays 15.0% 45.0% (150,000)         CCP Pays

D 15.0% (187,500)             (1,250,000) CCP Pays 15.0% 60.0% (187,500)         CCP Pays

E 15.0% (300,000)             (2,000,000) CCP Pays 15.0% 75.0% (300,000)         CCP Pays

F 15.0% (375,000)             (2,500,000) CCP Pays 15.0% 90.0% (375,000)         CCP Pays

G 30.0% (900,000)             (3,000,000) CCP Pays 10.0% 100.0% (300,000)         CCP Pays

H 15.0% (750,000)             (5,000,000) CCP Pays

I 15.0% (7,500,000)        (50,000,000) CCP Pays

Total (562,500)         CCP Pays

BID AWARDS

Participant Size

Price per

given Size

Price per

100%

CCP Pay /

Receive

Participant

Award

Cumulative

Awards

Invoice

Amount CCP Pay/Receive

A 15.0% 450,000               3,000,000 CCP Receives 15.0% 15.0% (450,000)         CCP Pays

B 15.0% 300,000               2,000,000 CCP Receives 15.0% 30.0% (450,000)         CCP Pays

C 15.0% (150,000)             (1,000,000) CCP Pays 15.0% 45.0% (450,000)         CCP Pays

D 15.0% (187,500)             (1,250,000) CCP Pays 15.0% 60.0% (450,000)         CCP Pays

E 15.0% (300,000)             (2,000,000) CCP Pays 15.0% 75.0% (450,000)         CCP Pays

F 15.0% (375,000)             (2,500,000) CCP Pays 15.0% 90.0% (450,000)         CCP Pays

G 30.0% (900,000)             (3,000,000) CCP Pays 10.0% 100.0% (300,000)         CCP Pays

H 15.0% (750,000)             (5,000,000) CCP Pays

I 15.0% (7,500,000)        (50,000,000) CCP Pays

Clea ring Price: (3,000,000)      Total (3,000,000)      CCP Pays

BID AWARDS
 April 1, 2016

Page 18 

3.3 References to Groups of Positions 

Table 3 defines the standard terminology adopted by the DRMWG to reference groups of positions 

related to default management auctions. Figure 11 provides an illustration of this terminology. 

TABLE 3: STANDARD TERMINOLOGY TO DESCRIBE GROUPS OF AUCTION-RELATED POSITIONS

Term Description / Comments 

3.3.1 Defaulter’s Portfolio  The portfolio of one or more clearing members in a state of default, which 

becomes the responsibility of the CCP to liquidate and/or port in order to return 

to a balanced book 

 The Defaulter’s Portfolio contains primarily cleared positions at the time of 

default, but can also contain: 

- Hedges (risk reducing transactions) 

- Collateral posted by one or more defaulting clearing member 

3.3.2 Auction Portfolio 

 

 A sub-set of (or all) positions in the Defaulter’s Portfolio that the CCP wishes to 

liquidate in a given auction 

 In some auctions, the CCP obscures the directionality of the Defaulter’s Portfolio 

by adding a mirror Auction Portfolio, which is identical to one of the real 

Auction Portfolios but has the directionality of all positions reversed 

3.3.3 Offered Package  Offered Packages define the sub-sets of the Auction Portfolio that auction 

participants can choose to bid for, in combination and/or individually, as part of 

a Selective Bidding auction 

 Offered packages do not have to be mutually exclusive 
 April 1, 2016

Page 19 

FIGURE 11: RELATIONSHIP BETWEEN A DEFAULTER’S PORTFOLIO, AUCTION PORTFOLIO AND OFFERED PACKAGES

 
 April 1, 2016

Page 20 

3.4 Bids and Bid Construction 

Table 4 defines the standard DRMWG terminology related to the components of an auction participant’s 

bid. 

To reduce the chances of erroneous submissions and/or erroneous interpretation of submissions, CCPs 

will collect bids in a format that follows standard market conventions. CCPs with similar product types 

should strive to follow the same bidding formats and conventions. Generally, CCP should collect bids in 

terms of a Price representative of the selected Bidding Package along with the Size desired. The Auction 

Participant should not adjust its submitted Price for its desired Size. For auctions in which bidders are 

required to provide Levels or provide a Price per given unit Size (rather than the standard 100% of the 

selected Bidding Package), the CCP may compute the equivalent Price (per 100% size) and provide it to 

the Auction Participant for reference. 

Some CCPs might maintain auction formats in the framework of which they require Auction 

Participants to provide a two-way quote for a Bidding Package. In such case, the required quote must 

consist of a Price to buy and a Price to sell the Bidding Package, whereas the CCP reserves the right to 

define a maximum spread allowable between these two Prices. 

In the definitions adopted by the DRMWG, the Price includes a sign that indicate whether associated 

Invoice Amounts (see 3.6.3) will be positive or negative from the bidder’s perspective. Specifically, if 

the Price submitted for a Bidding Package is positive, the associated Invoice Amount will be positive 

and the Auction Participant will be required to pay the CCP. Conversely, if the Price submitted is 

negative, the associated Invoice Amount will be negative and the CCP will be required to pay the 

Auction Participant. 

Payment of the Invoice Amount associated with a winning bid at a given Price is in addition to any other 

business-as-usual payments between the CCP and Auction Participant, including those related to the 

transfer of the defaulter’s positions to the Auction Participant’s portfolio, such as end-of-day mark-tomarket payments and initial margin payments. Bidders therefore need to remain cognizant of the 

settlement method used to transfer the awarded positions. Because of the importance of settlement 

method in pricing an auction submission, the DRMWG recommends that CCPs specify the settlement 

method at the time they request submissions. An Auction Participant may adjust the Price of its 

submission below market value if it requires compensation related to incurred costs associated with a 

potential auction award, or adjust the Price of its bid above market value if it wishes to pay a premium to 

increase the probability of receiving the desired portfolio. 

Table 5 provides stylized examples of how an Auction Participant may construct its bid for various 

positions and settlement methods. This table is not intended to be comprehensive and it does not include 

all bid construction scenarios, but rather illustrates the concept. 
 April 1, 2016

Page 21 

TABLE 4: STANDARD TERMINOLOGY AND CONVENTIONS FOR AUCTION BIDDING

Term Description / Comments

3.4.1 Bidding Package  The Bidding Package associated with an Auction Participant’s bid 

identifies the specific sub-set of Auction Portfolio positions on which it is 

bidding 

 The Auction Participant specifies the Bidding Package in terms of a valid 

combination of the Offered Packages provided by the CCP, as per the 

clearinghouse’s instructions for Offered Package selection 

 The Auction Participant’s bid need only identify a Bidding Package for 

Selective Bidding auctions, for the other three standard CCP auction types 

(see Figure 7) the Bidding Package is implicitly the entire Auction 

Portfolio 

3.4.2 Bid Size  The Bid Size associated with an Auction Participant’s bid identifies the 

portion of the Auction Portfolio notional amounts / number of contracts on 

which it is bidding, and it is subject to minimum bid size (see 3.5.3) and 

bid size increment (see 3.5.2)

 The Auction Participant specifies Size in terms of a single percentage, 

which applies to the notional amounts / number of contracts of all Auction 

Portfolio positions on which the Auction Participant is bidding, or in terms 

of number of portfolio units. 

3.4.3 Price or Level Price 

 The Price associated with an Auction Participant’s bid specifies the 

maximum CCP invoice amount, in the Auction Currency, that the Auction 

Participant would accept for receiving the sub-set of Auction Portfolio 

positions on which it is bidding, at a Bid Size of 100% or at a Bid Size 

which satisfies minimum bid size and bid size increment criteria 

 If a CCP applies two-way bidding, Auction Participants are required to 

provide both a Price to buy and a Price to sell, in the Auction Currency for 

the specified sub-set of Auction Portfolio. 

 The invoice amount is the payment to/from the Auction Participant 

associated with a winning bid 

 A positive invoice amount (and therefore a positive Price) represent 

payment from the Auction Participant to the CCP 

 A negative invoice amount (and therefore a negative Price) represents 

payment from the CCP to the Auction Participant 

 The invoice amount is in addition to any other “business-as usual” 

payments (positive and/or negative) between the CCP and Auction 

Participant related to the transfer of positions from the defaulter’s portfolio 

to the Auction Participant’s portfolio, such as end-of-day mark-to-market 

payments and initial margin payments 

 In order for Auction Participants to take into consideration, when pricing 

their bids, any business-as-usual payments associated with a winning bid, 

as part of an auction’s specification the CCP outlines the settlement 

method for resulting awards and provides a summary of the types of 

business-as-usual payment that will be associated with taking on the 

awarded positions 

Level 

 If a CCP is requesting bids for positions in individual instruments (i.e., 

offered packages are for individual positions rather than a sub-portfolio of 
 April 1, 2016

Page 22 

positions), then the CCP may request Auction Participants to provide the 

worst execution level they are willing to accept for receiving their stated 

Size in the given position 

 The CCP computes the invoice amount associated with an auction award 

following market convention and/or the CCP’s stated methodology for 

computing profit or loss (P/L) from the execution level, size and 

directionality of the awarded position 

 The CCP defines the units in which an Auction Participant must state the 

execution level associated with its bid, typically following market 

conventions for the given instrument (e.g., Credit Default Swap spread 

level in bps, etc.) 

3.4.4 Settlement Method  The Settlement Method specified by the CCP in relation to a given auction 

describes any economic or operational details related to its transfer of 

awarded positions from the Auction Portfolio to winning Auction 

Participants’ portfolios, that may be relevant to Auction Participants in the 

formulation of their bids 

 One element of the Settlement Method that is important for certain asset 

classes is whether the CCP transfers the positions are at zero or at last 

mark 

- If the CCP transfers the positions at the last mark, the CCP computes 

the business-as-usual mark-to-market payments associated with each 

position in the transferred portfolio based on the difference between 

the previous day’s marks and the marks at the next settlement cycle 

(i.e. end-of-day or intraday) following the auction 

- If the CCP transfers the positions at zero, the CCP computes the 

business-as-usual mark-to-market payments associated with each 

position in the transferred portfolio based on the difference between 

zero and the marks at the of the next settlement (i.e. end-of-day or 

intraday) cycle following the auction 

 Another important element of the Settlement Method is the operational 

process for payment of the invoice amount associated with an auction 

award 

- One example is a “one-off” settlement made by Delivery Versus 

Payment (DVP), most commonly used in the transfer of awarded 

collateral positions in which the collateral is transferred when specific 

payment for the invoice amount is received 

- Another example is for the CCP to combine the payment for the 

invoice amount associated with the auction award with all other 

business-as-usual payments between the CCP and a winning Auction 

Participant, such that the winning Auction Participant and the CCP 

exchange one net cash flow through their established business-as-usual 

settlement cycle 

3.4.5 Capital Considerations  The Capital Considerations outlined by the CCP in relation to a given 

auction serve as a reminder to Auction Participants of their obligations to 

the CCP should they receive an auction award 

 Typical Capital Considerations for winning Auction Participants include: 

- Impact on risk requirements including Initial Margin, Variation 

Margin and Guaranty Fund requirements 

- The business-as-usual timing for meeting increased risk requirements 

- Any implications for Auction Participant not meeting their obligations 
 April 1, 2016

Page 23 

TABLE 5: STYLIZED EXAMPLE OF BID CONSTRUCTION

related to receiving auction awards 

Term Description / Comments

Auction Type: 

 Single Unit Pay Your 

Price 

Settlement Method: 

 Transfer at last mark 

 Invoice Amount 

included in end-of-day 

net payment cycle 

Assumptions: 

 Auction Portfolio: Net position of 20 long Futures contract with a multiplier of 100 

 Previous day settlement price = 2040 

 Price as of the time of the auction = 2038 

 End-of-day settlement price = 2039 

Bid Construction: 

 The Auction Participant is willing to take on the position at market value (without 

charging a premium for costs associated with taking on the portfolio) 

 The price at the time of the auction is 2038, so the Auction Participant submits a Price 

of -$4,000, representing an invoice amount payable from the CCP to the Auction 

Participant, should the Auction Participant win the auction: the Auction Participant 

calculates the bid Price as: (2038-2040) * 100 * 20 

Settlement: 

 The Auction Participant wins the auction and is awarded the 20 long Futures contracts 

for an invoice amount of -$4,000 (CCP pays Auction Participant) 

 The invoice amount of -$4,000 is included in the end-of-day net payment cycle 

 Because the CCP transferred the position at last mark, the CCP’s business-as-usual 

processing generates a mark-to-market payment associated with the awarded position of 

-$2,000 (Auction Participant pays CCP, calculated as: (2039- 2040) * 100 * 20 

 The net of the invoice amount and first mark-to-market payment is -$2,000 (CCP Pays 

Auction Participant, calculated as -$4,000 + $2,000) 

 Should the Auction Participant have held the same position on the prior day and not 

benefitted from the invoice amount, its mark-to-market payment would not have been 

offset and the Auction Participant would have paid $2,000 to the CCP as part of the 

end-of-day net payment cycle 

 As part of its business-as-usual processes, the CCP re-calculates the risk requirements 

for the winning Auction Participant’s cleared portfolio, which now includes the 

transferred Futures contracts, and includes any required payments to/from the CCP for 

risk margining or guaranty fund purposes in the relevant business-as-usual payment 

cycle 

Auction Type: 

Single Unit Pay Your 

Price 

Settlement Method: 

 Transfer at zero 

 Invoice Amount 

included in end-of-day 

net payment cycle 

Assumptions 

 Auction Portfolio: Net position short 15 call options with a multiplier of 100 

 Previous day settlement price = 2.35 

 Price as of the time of the auction = 2.50 

 End-of-day settlement price = 2.60 

Bid Construction: 

 The Auction Participant requires a $75 premium for taking on the portfolio 

 The price at the time of the auction is 2.50, so the Auction Participant submits a Price of 
 April 1, 2016

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3.5 Constraints and Requirements 

Table 6 defines standard terminology for the constraints and requirements placed on auction participant 

bids by CCPs. 

TABLE 6: STANDARD TERMINOLOGY FOR AUCTION CONSTRAINTS AND REQUIREMENTS

Term Description / Comments 

3.5.1 Auction Currency  Currency in which auction participants must specify the Invoice 

Amount 

3.5.2 Bid Size Increment  Bid Size must be specified in terms of integer multiples of the Bid Size 

Increment 

 Sets a lower limit on the material difference between any two auction 

participant’s bid Sizes 

3.5.3 Minimum Bid Size  If an auction participant provides a bid, the Bid Size must be greater 

than or equal to the Minimum Bid Size to be considered a valid bid 

 The Minimum Bid Size must be an integer multiple of the Bid Size 

Increment 

 Sets a lower-limit on the materiality of any bid received from an 

auction participant 

3.5.4 Minimum Bid Requirement  The smallest cumulative Bid Size, across all valid bids provided by a 

given auction participant, that is required of that auction participant by 

the CCP 

 Auction participants not meeting their Minimum Bid Requirement may 

be subject to penalties by the CCP 

-$3,825 (CCP Pays Auction Participant, calculated as: (2.50 * 100 * -15) - 75 

Settlement: 

 The Auction Participant wins the auction and is awarded the 15 short call options for an 

invoice amount of -$3,825 (CCP pays Auction Participant) 

 The invoice amount of -$3,825 is included in the end-of-day net payment cycle 

 The CCP’s business-as-usual processing computes the daily change in Net Liquidating 

Value (NLV) for the positions transferred to the winning Auction Participant. Because 

the positions were transferred at zero, the NLV is $3,900 (Auction Participant pays 

CCP, calculated as: (2.60 - 0) * 15 * 100 

 For the winning Auction Participant, the net of the invoice amount and its “first” NLV 

payment related to the transferred positions is $75 (Auction Participant pays CCP, 

calculated as -$3,825 + $3,900) 

 As part of its business-as-usual processes, the CCP re-calculates the risk requirements 

for the winning Auction Participant’s cleared portfolio, which now includes the 

transferred Options contracts, and includes any required payments to/from the CCP for 

risk margining or guaranty fund purposes in the relevant business-as-usual payment 

cycle 
 April 1, 2016

Page 25 

Term Description / Comments 

3.5.5 Price Increment  Price must be specified in terms of integer multiples of the Price 

Increment 

3.5.6 Reserve Price  The lowest Price (smallest payment to the CCP per unit / largest 

payment to the auction participant per unit) that the CCP considers a 

valid bid 

 Established an upper-limit on the amount CCP will pay winning 

auction participants per unit of the Auction Portfolio 

 Reserve prices may be private (i.e., known only to the CCP), or 

provided to all auction participants as part of the CCP’s auction 

specification 

 When a CCP sets a private Reserve Price ahead of an auction, or sets 

no Reserve Price ahead of an auction, the CCP may, subject to its 

Rules and procedures, set or revise its Reserve Price based on received 

bids. This enables a CCP to award less than 100% of its Auction 

Portfolio if it observes a significant decrease in Price in the last several 

potentially winning bids, and believes it may achieve a better Price for 

that residual component in a separate auction or using some other 

liquidation mechanism. 

 The CCP should state its public Reserve Price, if applicable, or state 

“Private” or “None”. If the CCP has the ability under its Rules and 

procedures to set or revise a private Reserve Price after receiving bids, 

it should also state, “Reserve Price subject to revision based on 

received bids.” 

3.5.7 Maximum Price  The highest Price (largest payment to the CCP per unit / smallest 

payment to the auction participant per unit) that the CCP considers a 

valid bid 

 Provides the CCP with a mechanism with which to protect auction 

participants from grossly over-paying (or being grossly under-paid) for 

a given Auction Award – as might result from erroneous bids 

 The CCP may, subject to its Rules and procedures, set no Maximum 

Price, set a private Maximum Price, publish a Maximum Price prior to 

the auction, or revise or set a Maximum Price after receiving all bids, 

such that the CCP may eliminate obviously erroneous bids. 
 April 1, 2016

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3.6 Awards 

Table 7 defines the standard terminology related to auction awards. Figure 12 provides an illustration of 

the relationship between Auction Portfolio, Auction Award and Awarded Portfolio. 

TABLE 7: STANDARD TERMINOLOGY AND CONVENTIONS FOR AUCTION AWARDS

Term Description / Comments

3.6.1 Auction Award  Portion of an Auction Portfolio / Bidding Package for which ownership 

will be transferred from the CCP to a winning auction participant 

3.6.2 Awarded Portfolio  Actual positions for which ownership will be transferred from the CCP 

to a winning auction participant 

 Includes the result of rounding on the notional amounts / number of 

contracts for each position 

- For example, if three auction participants are awarded 1/3 of an 

Auction Portfolio containing one position with a notional amount 

of $100 million, rounding awarded notional amounts to the nearest 

dollar and allocating any remainder amongst the winners results in 

two of the three winners receiving a position with a notional 

amount of $33,333,333.00 and one winner receiving a position 

with a notional amount of $33,333,334.00 

3.6.3 Invoice Amount  The required payment between the CCP and a winning auction 

participant related to a given Auction Award 

- Negative = CCP pays auction participant 

- Positive = Auction participant pays CCP 

3.6.4 Clearing Price  For a Modified Dutch auction, the clearing price is the lowest price bid 

by a winning auction participant, i.e. the worst winning price from 

CCP perspective. 

FIGURE 12: RELATIONSHIP BETWEEN AUCTION PORTFOLIO, AUCTION AWARD AND AWARDED PORTFOLIO
 April 1, 2016

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3.7 Lifecycle 

Table 8 defines the standard terminology related to the auction lifecycle. Figure 13 provides stylized 

illustration of the auction lifecycle. 

TABLE 8: STANDARD TERMINOLOGY AND CONVENTIONS RELATED TO THE AUCTION LIFECYCLE

Term Description / Comments 

3.7.1 Summary Auction Specification  A table provided to potential auction participants by the CCP, which 

defines the terms of an auction using a standard format and standard 

terminology, as defined by the DRMWG 

3.7.2 Publication Time  The date and time that the Auction Portfolio will be made available by 

the CCP to auction participants 

3.7.3 Bidding Open  The date and time that the CCP will begin accepting bids 

3.7.4 Bidding Close  The date and time that the CCP will stop accepting bids 

3.7.5 Bidding Extension Period (optional)  Maximum period of time by which the CCP may extend the Bidding 

Close 

3.7.6 Expected Auction Completion Time 

(optional)  The date and time by which the CCP estimated it will have 

communicated auction results to auction participants 

3.7.7 Bid Expiration Time  The time or duration after Bidding Close for which bids are actionable. 

It should generally be longer than (but may be equal to) the Expected 

Auction Completion Time. 

FIGURE 13: STYLIZED EXAMPLE OF THE AUCTION LIFECYCLE

 
 April 1, 2016

Page 28 

3.8 Summary Auction Specification Template 

Table 9 provides an illustration of the Summary Auction Specification template in tabular form. For 

each item in the template, Sections 3.8 (a) through (x) either provides the appropriate definition or 

provides a reference to the relevant definition elsewhere in this document. 

a. Related Default Event 

The CCP may provide a short description of the circumstances leading to the auction, for example 

“Lehman Brothers Bankruptcy”. 

b. Auction Reference 

A unique reference for the auction, so that stakeholders can use it on subsequent communications to 

avoid confusion with other ongoing auctions. 

c. Clearing Service 

CCP name, or, if the CCP divides its clearing business into separate business lines by asset class, 

geography, or otherwise, the CCP identifies the relevant characteristics. Clearing business lines often 

have separate clearing memberships and default funds. 

d. Auction Portfolio 

Short description of the positions in the Auction Portfolio, for example “Sovereign Single Name CDS”. 

e. Publication Time 

Date and time from which it will make the Auction Portfolio available to approved auction participants. 

f. Standard CCP Auction Type 

 “Single Unit Pay Your Price”, “Multi-Unit Pay Your Price”, “Modified Dutch” or “Selective Bidding”. 

g. Tie Break Rules 

The CCP provides the rules that it will use in tie breaking situations when it receives multiple bids of the 

same Price and, due to the bids received at a higher price, cannot award all auction participants 

submitting those same-Price bids their requested Size. Examples include “Pro-rata based on Size”, 

“Random Selection” and “First Received Bid”. 

h. Bidding Open 

See 3.7.3. 
 April 1, 2016

Page 29 

i. Bidding Close 

See 3.7.4. 

j. Bidding Extension Period (optional) 

See 3.7.5. 

k. Expected Auction Completion Time 

See 3.7.6. 

l. Bid Expiration Time 

See 3.7.7. 

If CCP wants to extend the Bid Expiration Time, it should confirm with bidders that their bids are still 

actionable. If bids are no longer actionable, CCP may have to rerun the auction. 

m. Participant Type 

The CCP states the type of participation for the given auction participant. The type of participation may 

be “Clearing Member - Voluntary”, “Clearing Member - Mandatory”, “Direct Participating Customer - 

Voluntary”, “Direct Participating Customer - Mandatory”. If a clearing member and/or the CCP has yet 

to complete required approvals for the participation of a Direct Participating Customer, the CCP should 

also state “Subject to final CCP / clearing member approvals”, or similar language. 

n. Minimum Bid Requirement 

See 3.5.4. 

o. Auction Currency 

See 3.5.1. 

p. Offered Packages (Selective Bidding Auctions only) 

All Offered Packages available in a Selective Bidding auction. 

q. Bidding Package Selection Rules (Selective Bidding Auctions only) 

Description of the valid combinations of Offered Packages that an auction participant may bid on. 

r. Minimum Bid Size 
 April 1, 2016

Page 30 

See 3.5.3. 

s. Bid Size Increment 

See 3.5.2. 

t. Price Increment 

See 3.5.5. 

u. Reserve Price 

See 3.5.6. 

v. Maximum Price 

See 3.5.7. The CCP should state its public Maximum Price, if applicable, or state “Private” or “None”. If 

the CCP has the ability under its Rules and procedures to set or revise a private Maximum Price after 

receiving bids, it should also state, “Maximum Price subject to revision based on received bids”. 

Optional Items: 

w. Bidding Incentives 

The CCP provides a high-level description of any mechanism that it will use in the auction to incentivize 

participation and/or competitive bidding, for example “Default funds subject to juniorization if 

Minimum Bid Requirement is not met”. 

x. Participant Funds Subject to Bidding Incentives 

The CCP provides the value of the auction participant’s default resources that it will expose to bidding 

incentive in the given auction. 
 April 1, 2016

Page 31 

TABLE 9: STANDARD AUCTION SPECIFICATION TEMPLATE

Item Specification Item Specification 

Related Default 

Event  . .. Offered Packages  . .

Auction Reference  . .. Bidding Package 

Selection Rules 

 . .

Clearing Service  . . Minimum Bid Size  . .

Auction Portfolio  . . Bid Size Increment  . .

Publication Time  . . Price Increment  . .

Standard CCP 

Auction Type 

 . . Reserve Price  . .

Tie Break Rules  . . Maximum Price  . .

Bidding Open  . .

Bidding Close  . .

Expected Auction 

Completion Time 

 . . 

Bidding Expiration 

Time 

 . . If applicable: 

Participant Type  . . Bidding Incentives  . .

Minimum Bid 

Requirement 

 . . Participant Funds 

Subject to Bidding 

Incentives 

 . .

Auction Currency  . .
 April 1, 2016

Page 32 

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