Credit Event Auctions were designed to ensure a fair, efficient and transparent process for settlement of credit derivative trades following a credit event. The auctions were developed by Creditex and Markit in close cooperation with ISDA and major credit derivatives dealers and are an integral part of ISDA's credit derivatives definitions. Creditex and Markit have jointly acted as administrators of the credit event auctions since their inception in June 2005.
During a Credit Event Auction, dealers place executable orders on the Creditex platform for obligations issued by a particular company that has undergone a credit event, such as a bankruptcy filing or debt restructuring. A market standard methodology executes the orders at the calculated final price, which is also used as the cash settlement price for eligible credit derivative contracts. Markit reviews the order submissions and corroborates the auction results, including the final auction price, which is published on: creditfixings.com
Credit Event Auctions are now the market standard for settlement of CDS and Loan CDS products. Since inception, over 160 auctions have been run for North American, European, and Japanese corporate and sovereign credits.