The infamous largest passenger liner of its time, the RMS Titanic, promised the world it would not sink and yet its powerful design still was no match for the iceberg that sent it to its underwater grave. Similarly, there were those financial entities who claimed that they were too large to fail, yet collided with a devastating crisis that saw them sink as quickly as the Titanic.


While entities that clear, settle and record financial transactions (known as Financial Market Infrastructures (FMIs) withstood the effects of a financial meltdown, international standard-setting bodies are making sure that FMIs can endure any future stress scenarios and are stepping up their game to re-enforce risk management defence systems.


Financial Market Infrastructures

FMIs use sophisticated, world-class systems to handle considerable transaction volumes and monetary values on a daily basis. They strengthen markets and cultivate economic growth and financial stability but, it must be noted, also concentrate risk as some of their activities are centralised.


As FMIs manage, reduce or eliminate certain risks in the market, it is essential that they are managed properly themselves. This is why the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO) have released 24 new best practice guidelines to effectively address new risks and drive further efficiencies.


The new CPSS IOSCO Principles


These guidelines are set to be adopted by a number of international markets as the Group of Twenty (G-20) Finance Ministers and Central Bank Governors, of which South Africa is a member, having previously endorsed the new CPSS IOSCO Principles.


With South Africa financial market development ranked third in the World Economic Forum’s latest Global Competitiveness Report, the sector always looks at adopting the latest best practice to have it benchmarked against international standards.


Five key types of FMIs have been identified by CPSS IOSCO in its Principles. These are:

  • Payment Systems (PSs), which are systems that have a set of instruments, rules and procedures for the transfer of funds between or among participants;
  • Central Securities Depositories (CSDs), which provide central safekeeping services, asset services and securities accounts;
  • Securities Settlement Systems (SSSs) that transfer and settle securities, most of which have infrastructure that facilitates the delivery of securities into the name of the new owner at the exact moment that payment is made;
  • Central Counterparties (CCPs) are introduced between counterparties to contracts that are traded in one or more financial market, becoming a buyer to every seller and a seller to every buyer; and
  • Trade Repositories (TRs), which is an entity that maintains a centralised electronic record of transaction data to enhance transparency in the market.


The Principles look at the general organisation from a legal, risk management and governance point of view. It then looks at the FMIs credit and liquidity risk management, by looking at collateral and margins, for example. Other items addressed include settlement, default management and efficiency, to name a few.


The table below gives a fair indication of the guidelines that will specifically be applicable to different FMIs. It is intended to depict the applicability of the Principles for each different design and type of FMI as defined by CPSS IOSCO. It is important to note that it is possible for an FMI to perform more than one type of FMI function and this would need to be taken into account when determining which particular Principles will be applicable to them.

Table 1

General applicability of principles to specific types of FMIs

Source: BIS
More information on the individual CPSS IOSCO Principles can be downloaded via


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