Financial Stability Standards for Central Counterparties – December 2012 Introduction for Standards
Note: The headline standard and numbered ‘sub’-standards determined under section 827D(1) of the Corporations Act 2001 have been formatted in bold text while the guidance to these standards has been formatted as plain text. For more information see the Introduction for Standards and Introduction for Guidance. Although the Reserve Bank has taken due care in compiling this page, the published version of the Standards and Guidance should be used in the case of any differences between the two.
The Financial Stability Standards for Central Counterparties (CCP Standards) are determined under section 827D(1) of the Corporations Act 2001 (the Act). The CCP Standards apply to all holders of an Australian Clearing and Settlement (CS) Facility Licence, under Part 7.3 of the Act, that operate a central counterparty. Separate financial stability standards apply to CS facility licensees that operate a securities settlement facility. For the purposes of the CCP Standards, a central counterparty is a CS facility operated by an Australian CS facility licensee where the CS facility licensee interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer, and thereby ensuring the performance of open contracts. Unless the contrary intention appears, obligations on a central counterparty arising from the CCP Standards should be interpreted as being obligations on the CS facility licensee, as operator of the central counterparty.
Objectives of the CCP Standards
The objectives of the CCP Standards are to ensure that CS facility licensees identify and properly control risks associated with the operation of the central counterparty and conduct their affairs in accordance with the CCP Standards in order to promote overall stability of the Australian financial system. Primary responsibility for the design and operation of a central counterparty in accordance with the CCP Standards lies with a CS facility licensee's board and senior management.
How a Licensee Meets the CCP Standards
Each CCP Standard comprises a list of requirements that, through the operation of section 821A of the Act, are binding on, and must be met by, a CS facility licensee that operates a central counterparty. To comply with a CCP Standard a CS facility licensee must comply with the headline standard and each of the numbered ‘sub’-standards listed under the headline standard. The CCP Standards are to be interpreted in accordance with their respective objectives and by looking beyond form to substance. In interpreting the CCP Standards, the word ‘should’ is to be treated as indicating a requirement upon the central counterparty to take the relevant action, unless otherwise agreed by the Reserve Bank of Australia (Reserve Bank). The Reserve Bank may, from time to time, issue guidance containing further information on specific aspects of the CCP Standards.
Where the requirements in the CCP Standards and those of the Act and Corporations Regulations 2001 are inconsistent, the requirements of the Act and Corporations Regulations will prevail to the extent of such inconsistency.
Note: The CCP Standards are based largely on the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) Principles for Financial Market Infrastructures (FMIs) (the Principles) and associated key considerations. [1] The Reserve Bank has, in parts, added to and amended the text of the Principles and associated key considerations. [2]
Footnotes
CPSS-IOSCO (2012), Principles for Financial Market Infrastructures, CPSS Publications No 101, Bank for International Settlements, April, available at <http://www.bis.org/publ/cpss101.htm>. [1]
A marked-up version of the CCP Standards, indicating where additions and alterations have been made to the text of the Principles, will be made available at <https://www.rba.gov.au/payments-and-infrastructure/financial-market-infrastructure/clearing-and-settlement-facilities/standards/201212-new-fss-ris/> by end 2012. [2]