IOSCO: monitoring of implementation of the Principles for Financial Market Infrastructures begins

The International Organisation of Securities Commissions (IOSCO) and the Committee on Payment and Settlement Systems (CPSS) have announced that they have started the process of monitoring implementation of the Principles for Financial Market Infrastructures (PFMIs).  The PFMIs were issued in April 2012, with a view to enhancing resilience and safety of financial market infrastructures, thus fostering financial stability.  The intention was that relevant authorities should strive to incorporate the principles in their legal and regulatory framework by the end of 2012, and that Financial Market Infrastructures (FMIs) subject to the principles (those determined by national authorities to be systemically important) would take appropriate and swift action in order to observe the principles.

The PFMIs deal with five key types of Financial Market Infrastructure (FMI): payment systems (PS), central securities depositories (CSDs), securities settlement systems (SSSs), central counterparties (CCPs) and trade repositories (TRs).   The presumption is that all FMIs (save for payment systems) will be systemically important.

The implementation monitoring will cover the implementation of the principles contained in the PFMIs as well as the responsibilities of central banks, market regulators, and other relevant authorities for financial market infrastructures relating to:

• Regulation, supervision, and oversight of FMIs
• Regulatory, supervisory, and oversight powers and resources
• Disclosure of policies with respect to FMIs
• Application of the principles for FMIs
• Co-operation, both domestic and international, between central banks, market regulators, and other relevant authorities in promoting the safety and efficiency of FMIs.

Reviews will be carried out in stages, assessing first whether a jurisdiction has completed the process of adopting the legislation and other policies that will enable it to implement the principles and responsibilities and subsequently whether these changes are complete and consistent with the principles and responsibilities.  Assessments will also examine consistency in the outcomes of implementation of the principles by FMIs and implementation of the responsibilities by authorities. The results of the assessments will be published on both the CPSS and IOSCO websites.

Jurisdictional coverage: The assessments will cover the following jurisdictions: Argentina, Australia, Belgium, Brazil, Canada, Chile, China, the European Union, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.

Types of FMI: In many jurisdictions, the framework for regulation, supervision and oversight is different for each type of FMI.  Whilst initial overall assessments will cover the regulation changes necessary for all types of FMI, further thematic assessments (examining the consistency of implementation) are likely to prioritise OTC derivatives CCPs and TRs, given their importance in completing the G20 commitments relating to central clearing and transparency for derivative products.

Timing: A first assessment is currently under way examining whether jurisdictions have made regulatory changes that reflect the principles and responsibilities in the PFMIs.  The results of this initial assessment are due to be published in the third quarter of 2013.