Illiquidity risk - administration and settlement

54.  Schroders and the Department appear to have had extensive discussions with the DMO about direct Gilt funding and the possibility of the GGBs being treated as Gilts. The DMO's views were sought in relation to the distribution method of the GGBs and the possibility of an auction (discussed in greater detail below). We understand that although the DMO believed an auction of GGBs would have been technically possible, auction of a product traded at a margin to gilts, would have been complex and a different type of system would probably have had to be put in place. The DMO do not believe any serious thought had been given to how a spread auction would be administered.