Hammer time? Clearers mull co-operation on default auctions

Some CCPs are mooting joint auctions to resolve large defaults – but critics deem them unworkable

The scenario has become alarmingly easy to imagine: one of the world’s largest swaps dealers has defaulted; the banking colossus holds enormous dollar rates portfolios with rival central counterparties – some of which directly offset each other – but competitive concerns mean this crucial information about offsetting positions is not shared. What follows is a slew of messy, piecemeal auctions, ending in large losses among surviving clearing members. The bank and its creditors are forced to dole