Implementation monitoring of PFMI: Level 2 assessment report for Australia

CPMI Papers  |  No 140  | 
17 December 2015
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 |  139 pages

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) continue to closely monitor the implementation of the Principles for financial market infrastructures (PFMI). The principles within the PFMI (the Principles) set expectations for the design and operation of key financial market infrastructures (FMIs) to enhance their safety and efficiency, and, more broadly, to limit systemic risk and foster transparency and financial stability. The Principles apply to all systemically important payment systems (PSs), central securities depositories (CSDs), securities settlement systems (SSSs), central counterparties (CCPs) and trade repositories (TRs) (collectively FMIs). These FMIs collectively clear, settle and record transactions in financial markets. In line with the G20's expectations, CPMI and IOSCO members have committed themselves to implementing and applying the PFMI in their respective jurisdictions.

This report presents the conclusions drawn by the CPMI and IOSCO from a Level 2 assessment of whether, and to what degree, the legal, regulatory and oversight frameworks, including rules and regulations, any relevant policy statements, or other forms of implementation applied to systemically important PSs, CSDs/SSSs, CCPs and TRs in Australia, are complete and consistent with the Principles.

Conducted as a peer review during 2015, this Level 2 assessment reflects the status of the Australian legal, regulatory and oversight framework as of 15 May 2015. Accordingly, assessment ratings reflect the implementation measures in place as of 15 May; other measures that were introduced after this date, or other material developments, are noted where relevant but were not considered in assigning ratings of consistency.

The authorities responsible for regulation, supervision and oversight of FMIs in Australia are the Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC). The RBA has sole responsibility for PSs, while ASIC has sole responsibility for TRs. ASIC and the RBA have co-regulatory responsibilities for CCPs and CSDs/SSSs based on the legal framework of the Corporations Act. The RBA is responsible for ensuring compliance with the Financial Stability Standards and reduction of systemic risk, while ASIC is responsible for ensuring compliance with the remaining obligations under the Corporations Act.

Overall, the assessment found that Australia has consistently adopted most of the Principles in all types of FMI. The RBA and ASIC took differing approaches to the adoption of the PFMI, which reflect their different approaches to policy and rule-making. For PSs, the RBA's adoption of the Principles through a policy statement was assessed to be consistent and complete. For CCPs and CSDs/SSSs, the RBA and ASIC have largely adopted the Principles consistently, with three areas that were found to be broadly consistent. For TRs, while ASIC's rules do not always mirror the language and structure of the Principles, the relevant requirements were found generally to have been implemented in a consistent or broadly consistent way - with five areas of broad consistency.