What are the auction settlement provisions applicable following a Restructuring credit event?
The Supplement does not change the methodology used in the existing CDS auctions, but it does provide that more than one auction may be held following a Restructuring credit event. In this event, CDS contracts will be grouped into buckets by maturity and depending on which party triggers the CDS. Deliverable Obligations will also be identified for each bucket (note that any Deliverable Obligations included in a shorter bucket will also be deliverable for all longer buckets). The volume of CDS in each bucket that are triggered will be used by the Determinations Committee (“DC”) to determine whether an auction will be held for that bucket. If the DC determines to hold an auction for a particular bucket, then that auction will be held according to the existing auction methodology that has previously been used for Bankruptcy and Failure to Pay credit events, except that the Deliverable Obligations will be limited to those falling within the relevant bucket.
