The Bank of England supervises three main types of FMI:
- recognised payment systems
- central securities depositories
- central counterparties (CCPs).
The Bank of England supervises three main types of FMI:
We supervise FMIs because financial markets rely on the continuity of the services they provide. Well-functioning FMIs improve the stability of markets and the wider financial system.
For example, businesses need payment systems to receive payments for goods and services. People also rely on them to receive salaries and benefits. Central securities depositories allow equities and bonds to be held and sold. Central counterparties guarantee that transactions will be honoured if a party defaults on a trade.
We supervise a range of different financial market infrastructure systems:
The Bank recognises the following CCPs:
The Bank recognises the following clearing houses which are not CCPs:
The Bank recognises the following systems designated under the Settlement Finality Regulations:
The Bank recognises the following operators under the Uncertified Securities Regulations:
We published our approach to supervising FMIs in 2013. It sets out our objectives and our expectations of the FMIs, and how we will assess the FMI against these objectives. In 2018 the Bank published its approach to supervising service providers to recognised payment systems specified under the Banking Act 2009.
We work with the Financial Conduct Authority (FCA) and overseas regulators to supervise FMIs. We have signed a memorandum of understanding on supervising FMIs with the FCA. Our standards for supervising FMIs are framed by the international CPSS/IOSCO principles for financial market infrastructures.
There are different legal regimes for central securities depositories, clearing houses (including central counterparties), payment systems and systems designated under the Settlement Finality Regulations.
Some systems may be subject to requirements under more than one regime.
Information on the effect of the UK’s withdrawal from the EU on FMI supervision is available here.
Operators of central securities depositories must meet the requirements of the Uncertificated Securities Regulations 2001 (USRs) in order to operate a system supporting the electronic transfer of titles to UK securities.
The Bank of England has a set of rules for operators of central securities depositories.
Central securities depositories may also be regulated under the Financial Services and Markets Act (FSMA) as a recognised clearing house. In this case they will need to adhere to the recognition requirement regulations in Part 18 of the Act.
Central securities depositories may also be regulated under the Banking Act 2009 if the payment arrangements supporting it constitute a recognised payment system.
Recognised clearing houses are regulated under Part 18 of the Financial Services and Markets Act and are subject to the recognition requirement regulations in the Act.
Recognised clearing houses that are central counterparties (CCPs) must comply with the European Market Infrastructure Regulation (EMIR) as well as the rules for recognised central counterparties set by the Bank of England.
Information on how non-UK FMIs may apply to become a recognised financial market infrastructure and receive UK settlement finality protection is available here.
Payment systems need to contact HM Treasury to discuss recognition, although the process can also be initiated by the Treasury. They will then be supervised by the Bank of England.
The Treasury has published a guidance note on the recognition process.
There is no standard application form for recognition as a recognised clearing house that is not a central counterparty (CCP). Section 288 of the Financial Services and Markets Act specifies some details of what must accompany an application. Prospective applicants should contact the Bank of England at an early stage for advice.
There is no standard application form for overseas CCPs seeking a recognition order under 170B of the Companies Act 1989. Prospective applicants should contact us at an early stage for advice.
Firms wishing to become a recognised overseas clearing house should contact us at an early stage for advice. Firms can no longer apply for recognised overseas clearing house status if they are a CCP.
Payment and settlement systems can apply for certain protections against normal insolvency law under the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (as amended), which implement the EU Settlement Finality Directive in the UK. This guarantees that financial instruments and payments which enter into such systems are finally settled, even if the sender has become insolvent or transfer orders have been revoked.
To receive these protections, systems must meet the criteria set out in the Settlement Finality Regulations and be designated by the relevant authority, which is the Bank of England for all entities other than recognised investment exchanges.
There is no standard application form to apply for designation – please contact us directly instead.
There are different application processes for different types of FMI. To contact us, please email FMIInformation@bankofengland.co.uk.
Under Article 54(2) of the Markets in Financial Instruments Regulation (MiFIR), a central counterparty (CCP) supervised by the Bank of England may apply to us for permission to make use of transitional arrangements so that Article 35 MiFIR regarding non-discriminatory access to a CCP would not apply to the applicant in respect of exchange-traded derivatives, for a transitional period until 3 July 2020. A CCP minded to submit such an application to us should consider the following factors:
Such applications may be submitted to us only if the European Commission has (as mandated by MiFIR Article 52(12)) submitted its report assessing the need to temporarily exclude exchange-traded derivatives from the scope of Article 35 and 36, and that report assesses that there is not a need to exclude exchange-traded derivatives.
Applications must be submitted before MiFIR comes into application on 3 January 2018. A prospective applicant may wish to contact us at an early stage to discuss the preparation, scheduling and practical aspects of an application.
You must apply to us in writing by emailing FMIInformation@bankofengland.co.uk. Applicants are advised to contact us at the same email address to discuss any arrangements required to transmit confidential information before such information is transmitted to us.
Content of applications
There is no prescribed template for this type of application by a CCP, but we expect any application of this type to contain sufficient and detailed evidence on at least the following:
On 4 June 2020, the Bank of England wrote to all regulated UK Financial Market Infrastructures and Specified Providers requesting that, when considering the distribution of profits they pay close attention to the additional risks and potential operational and financial demands arising in the current environment from COVID-19.
Under article 31 of the European Market Infrastructure Regulation (EMIR), those proposing to directly or indirectly dispose of, acquire or increase their qualifying holding in a UK CCP must first notify the Bank of England. Anyone who fails to comply with this obligation or who provides information to the Bank which is false in a material particular is guilty of a criminal offence under Regulation 15 of the Financial Services and Markets Act Regulations 2013 (SI/2013/504).
Anyone proposing to dispose, directly or indirectly, of a qualifying holding in a UK CCP is required to notify the Bank of England in writing before making the disposal. They are also required to notify us of a decision to reduce a qualifying holding so that the proportion of the voting rights or of the capital held would fall below 10%, 20%, 30% or 50%, or so that the CCP would cease to be their subsidiary.
You must send these details by email to FMIInformation@bankofengland.co.uk.
The email should include:
Anyone who wishes to acquire or increase, directly or indirectly, their qualifying holding in a UK CCP or to further increase such a qualifying holding with the result that their voting rights or capital held reaches or exceeds 10%, 20%, 30% or 50%, or so that the CCP would become their subsidiary, must first contact the Bank of England for approval.
If the proposed acquirer is not a body corporate, please contact us by email at FMIInformation@bankofengland.co.uk to discuss the form of the notification.
We have a pre-notification stage which is designed to help those proposing to acquire or increase a qualifying holding in a CCP to understand the process and to submit a complete application.
We recommend that you contact us at FMIInformation@bankofengland.co.uk to discuss whether a pre-notification meeting is necessary. You can submit a notification without contacting us first, but this increases the likelihood of your application being incomplete.
The Director, Financial Market Infrastructure Directorate, Bank of England, 20 Moorgate, London EC2R 6DA.
The EU Central Securities Depositories Regulation (CSDR) introduces a requirement that firms that carry out settlement activity outside central securities depositories (CSDs) report data quarterly on this activity to the Bank of England. This requirement, which is contained in Article 9 of the legislation, will apply from July 2019. The data will enable the Bank to identify, monitor and manage the risks related to this activity for the first time.
In November 2018, the Bank, with the help of the PRA and FCA, wrote to UK firms to ensure that they are aware of the requirement. We also asked them to complete an online survey (list of questions available here) and to provide contacts details for further, direct, communication. We contacted firms identified as having either, or both, of the following regulatory permissions, specified in Article 40 of the Regulated Activities Order, which are more relevant to carrying out settlement internalisation activities:
In April, the Bank will start the onboarding process and contact firms that confirmed in the survey that they anticipated having to report settlement internalisation activity. More details about the timeline and the onboarding process are available in this document.
If your firm has not been contacted, and you think your firm will need to report settlement internalisation activity, please email InternalisedSettlement-Enquiries@bankofengland.co.uk.
Financial market infrastructures are critical to a stable financial system. Systems should contact their supervisors in the first instance if they have any issues. In the event of a member problem, you should also email us at UK-SFDNotifications@bankofengland.co.uk to support the settlement finality notification obligations.
The purpose of the industry insolvency protocol is to promote a clearer understanding of the regime (set out in Part VII of the Companies Act 1989) and the responsibilities of central counterparties (CCPs) and insolvency practitioners (IPs) in the event of a default in relation to an insolvent clearing member. The protocol is non-binding and sets out the mutual understanding of the IPs and CCPs as to procedures that they consider would be desirable to be followed in such a default event.
The protocol includes:
The protocol is relevant for participants in central clearing including CCPs, clearing members and their clients; relevant authorities such as the Bank, HMT and the FCA; IPs; and any other party that may consider itself impacted by the default of a clearing member.
Whistleblowing is when someone reports suspected wrongdoing at work. You can make whistleblowing disclosures about financial market infrastructures to the Bank of England.
To make a disclosure, email firstname.lastname@example.org or telephone +44 (0)20 3461 8703 or write to Bank of England (Legal Directorate - IAWB), Threadneedle Street, London, EC2R 8AH.