Financial Market Infrastructures standards

Standards and supporting guidance

The 28 standards and the guidance are largely based on the (PFMI) issued by the Committee on Payments and Market Infrastructure (CPMI) and the International Organization of Securities Commissions.

Matters covered include the general organisation, structure and legal rights of FMIs; credit and liquidity risk management; settlement finality; central securities depositories and exchange-of-value settlement systems; default management; business and operational risk management; accessibility; efficiency; and transparency.

Changes from the draft standards include:

• FMI Standard 1: Legal Basis – the requirement to have binding rules and contracts has been more clearly defined to extend to activities of the FMI relating to the provision of essential services (as further defined in the standard);
• FMI Standard 4: Credit Risk and FMI Standard 7: Liquidity Risk – the requirements relating to simple central counterparty (CCP) activities and complex CCP activities have been distinguished. This is aligned with the approach in PFMI;
• FMI Standard 20: FMI Links – the standard now applies to operators of a pure payment system (PPS);
• FMI Standard 23B: Notifying the Regulator – for overseas-equivalent FMIs, only their New Zealand participants are captured. The same change was made to the definition under FMI Standard 17: “Operational Risk”.

The supporting guidance has been updated to reflect these changes, and provide further information, including:

• FMI Standard 2: Governance – if an FMI has multiple operators, the guidance confirms that the standards will apply to each operator specified in the FMI’s designation notice but, with a small number of exceptions relating to Standard 2, the regulators will be satisfied that an operator has discharged its obligations in relation to that FMI if it has ensured that another operator of the same FMI has discharged that obligation;
• FMI Standard 4: Credit Risk and FMI Standard 7: Liquidity Risk – clarifying when an FMI would be considered “systemically important in multiple jurisdictions”;
• FMI Standard 7: Liquidity Risk – an operator of a CCP, PPS or securities settlement systems will be treated as having sufficient liquid resources in all relevant currencies if it ensures that those currencies are able to be obtained on an intraday basis in all reasonably foreseeable scenarios;
• FMI Standard 14: Segregation and Portability – clarifies that there may be circumstances where it is unnecessary to facilitate portability of the positions of an FMI’s participant’s customers and related collateral (for example, where a position is very short-dated, and the applicable client positions will settle before porting can be completed);
• FMI Standard 17: Operational Risk and FMI Standard 17C: Cyber Resilience – clarifies that there may be circumstances where it is not reasonable to obtain an external assurance engagement following a relevant incident or outage. Examples would be where the cost outweighed any benefit or where an internal review would suffice – although the rationale for holding that view would need to be explained to the regulators.