Central Counterparty

Agreed and launched in 2012, the CPMI-IOSCO Principles for Financial Market Infrastructures (‘PFMIs’) require that all central securities depositories (CSDs), central clearing houses (CCPs), payment systems, and trade repositories perform a very detailed self-assessment of how well they observe these global standards. The self-assessments are meant to be published as a matter of enforcing transparency on these systemically critical systems, and also to reassure the markets and public that these national institutions are meeting a consistent set of minimum standards. The PFMIs are one set of the body of standards orchestrated by the Financial Stability Board on behalf of G20 governments.

This is the second in a series of articles on PMFIs.

In response to the Global Financial Crisis of 2007-2009, the G20 countries developed a series of public policy initiatives in order to reorder and de-risk the world’s financial system. As initially announced in the 2009 Pittsburgh Declaration by the heads of those 20 governments, a key element focused on solidifying market infrastructures, themselves a central focus of Thomas Murray’s work since the company’s founding in 1994.

This is the first in a series of four articles considering central bank payment systems self-assessments against the PFMIs.

Introduction and the Bank of England Example

In response to the financial crises of 2007-2009, at the behest of G20 governments, the Financial Stability Board and its constituent bodies developed broad global standards to shore up a system that had proven all too fragile – though it must be said that the public, regulated marketplaces did function throughout (except in isolated cases where for a few days their governments closed them for fear of collapsing prices). The same cannot be said of the freezing up of the far larger OTC and banks’ market operations in that period, which was the source of the economic and social damage inflicted.

The European regulator, ESMA (the European Securities and Markets Authority), has so far deemed the rules and their regulatory outcome around central clearing to be equivalent to its own standards in Japan, Singapore, Australia and Hong Kong, with the frameworks in Canada, Mexico and India expected to follow shortly. The big name missing from this list is the US.