Principles for financial market infrastructures - consultative report

CPMI Papers  |  No 94  | 
10 March 2011
PDF full text
 |  148 pages

The report Principles for financial market infrastructures contains new and more demanding international standards for payment, clearing and settlement systems. Issued for public consultation by the CPSS and the Technical Committee of the International Organization of Securities Commissions (IOSCO), the new standards (called "principles") are designed to ensure that the essential infrastructure supporting global financial markets is even more robust and thus even better placed to withstand financial shocks than at present.

The report contains a single, comprehensive set of 24 principles designed to apply to all systemically important payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories (collectively "financial market infrastructures" or "FMIs"). These FMIs collectively record, clear and settle transactions in financial markets.

When finalised, the new principles will replace the three existing sets of CPSS and CPSS-IOSCO standards, the Core principles for systemically important payment systems (2001); the Recommendations for securities settlement systems (2001); and the Recommendations for central counterparties (2004). The CPSS and IOSCO believe that a single set of principles will provide greater consistency in the oversight and regulation of FMIs worldwide.

Robust and efficient FMIs help to ensure that markets continue to function effectively even in times of crisis and are an essential prerequisite for financial stability. Although FMIs have generally performed well, there are nevertheless lessons to be learnt both from the recent crisis and from the years of more normal operation since the current standards were issued. Compared with the current standards, the new principles introduce more demanding requirements in many important areas including

  • the financial resources and risk management procedures an FMI uses to cope with the default of participants;
  • the mitigation of operational risk; and
  • the links and other interdependencies between FMIs through which operational and financial risks can spread.

There are also principles covering issues that are not fully addressed by the existing standards. These include new principles on segregation and portability, tiered participation and general business risk.

Published along with the report is a cover note which set out some specific issues on which the committees sought comments during the public consultation period, which ended on 29 July 2011.