This document provides a comprehensive technical overview of the Options Portfolio Auction mechanism in portfolio liquidation scenarios, detailing its architecture, execution methodology, and strategic advantages for both participants and market operators.

The mechanism is designed to facilitate the efficient liquidation of distressed portfolios while maintaining market stability and ensuring fair asset valuation. By leveraging automated bidding and risk management strategies, the system allows market participants to engage in transparent and competitive auctions.

Traditional liquidation methods rely on order book execution, position assignment systems (PAS), and unwinding. However, these methods pose challenges when dealing with complex portfolios, especially those involving options. The bid-ask spread in options markets can be large, making it difficult to execute liquidations efficiently.

To address these challenges, we introduced a portfolio auctioning mechanism that allows other users to place offers on a bankrupt user's portfolio, ensuring better price discovery, liquidity, and risk transfer. This auction system provides a structured alternative to direct order book liquidation, making the process more effective for complex portfolios.

Every portfolio containing options is split in two:

Part A goes through the equity protection process. Part B goes through the auction process. Therefore, the auction process described below concerns only the sub-portfolio B.