Financial market infrastructure supervision

The United Kingdom’s financial market infrastructure is critically important, providing functions that are relied upon by the financial system every single day.

Overview

The Bank of England supervises three main types of FMI:

  • recognised payment systems
  • central securities depositories
  • central counterparties (CCPs).

Why does the Bank supervise FMIs?

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.

Which FMIs does the Bank supervise?

We supervise a range of different financial market infrastructure systems:

  • Recognised payment systems

    • Bacs (recognised 5 January 2010)
    • CLS (recognised 5 January 2010)
    • CREST (recognised 5 January 2010)
    • LCH Ltd (recognised 5 January 2010)
    • Faster Payments Service (recognised 24 February 2010)
    • ICE Clear Europe (recognised 24 February 2010)
    • Visa Europe (recognised 19 March 2015)
    • LINK (recognised 23 May 2016)
    VocaLink as of 25 April 2018, has been specified as a service provider in the recognition orders of Bacs, Faster Payments Services and LINK.
    CHAPS as of 13 November 2017 is supervised on a non-statutory basis.
  • Recognised CCPs

    The Bank recognises the following CCPs: 

    ICE Clear Europe Limited

    • Initial authorisation: 19 September 2016 (previously recognised as a clearing housing since 15 May 2008)
    • Latest variation: 31 July 2018
    • Address: Fifth floor, Milton Gate, 60 Chiswell Street, London EC1Y 4SA
    • ICE Clear Europe authorised services and activities
    • Classes of over-the-counter derivatives that ICE Clear Europe has been authorised to clear
    • ICE Clear Europe submitted an application to the Bank of England in accordance with Article 54(2) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending regulation (EU) No 648/2012 (MiFIR) for permission to avail itself of transitional arrangements. The Bank of England, having taken into account the relevant risks resulting from the application of the access rights under Article 35 as regards exchange-traded derivatives to the orderly functioning of the CCP, has decided that Article 35 will not apply to ICE Clear Europe in respect of exchange-traded derivatives, for a transitional period until 3 July 2020.  This decision will be subject to, and effective on and from, MiFIR coming into application on 3 January 2018.

    LCH Limited

    LME Clear Limited

    • Initial authorisation: 3 September 2014
    • Address: 10 Finsbury Square, London EC2A 1AJ
    • LME Clear authorised services and activities 
    • Classes of over-the-counter derivatives that LME Clear has been authorised to clear
    • LME Clear submitted an application to the Bank of England in accordance with Article 54(2) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending regulation (EU) No 648/2012 (MiFIR) for permission to avail itself of transitional arrangements. The Bank of England, having taken into account the relevant risks resulting from the application of the access rights under Article 35 as regards exchange-traded derivatives to the orderly functioning of the CCP, has decided that Article 35 will not apply to LME Clear in respect of exchange-traded derivatives, for a transitional period until 3 July 2020.  This decision will be subject to, and effective on and from, MiFIR coming into application on 3 January 2018.
  • Recognised clearing houses

    The Bank recognises the following clearing houses which are not CCPs: 

    Euroclear UK and Ireland Limited

    • Effective date: 23 November 2001
    • Address: 33 Cannon Street, London EC4M 5SB
  • Designated systems under the Settlement Finality Directive

    The Bank recognises the following systems designated under the Settlement Finality Regulations: 

    • Bacs (operated by Bacs Payment Schemes Limited)
    • CHAPS (operated by Bank of England)
    • Cheque Clearing System and Credit Clearing System (operated by the Cheque and Credit Clearing Company)
    • Continuous Linked Settlement (operated by CLS Bank International)
    • Euroclear UK and Ireland
    • Faster Payments Service (operated by the Faster Payments Scheme Ltd)
    • ICE Clear Europe
    • Image Clearing System (operated by Cheque & Credit Clearing Company)
    • LCH Limited
    • LME Clear Limited
    • SIX x-clear
  • Approved operators under the Uncertificated Securities Regulations

    The Bank recognises the following operators under the Uncertified Securities Regulations:

    • Euroclear UK & Ireland

How does the Bank supervise FMIs?

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.

  • Requirements for central securities depositories

    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.

  • Requirements for recognised payment systems

    The Bank of England may publish principles and codes of practice for recognised interbank payment systems, under the Banking Act 2009. The Act provides us with a graduated set of tools to help us supervise recognised payment systems. It also requires us to publish a policy on financial penalties.
     
    For recognised payment systems, we have adopted the global standards drawn up by central banks and securities market regulators in the CPSS/IOSCO principles for financial market infrastructure as principles. The Bank of England has also published a code of practice on governance that applies to some recognised payment systems. 
  • Requirements for designated systems

    The Settlement Finality Regulations allow payment and settlement systems to apply for certain protections against normal insolvency law in respect of transfers through their systems. To receive these protections, systems must meet the criteria set out in the regulations and be designated by the relevant authority. 

Applying to become a recognised financial market infrastructure and receive UK settlement finality protection

Information on how non-UK FMIs may apply to become a recognised financial market infrastructure and receive UK settlement finality protection is available here.

  • Apply to become a recognised payment system

    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.

  • Apply to become a recognised clearing house or central counterparty

    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.

  • Apply to become a recognised central securities depository

    There is no standard application form to apply to become an operator of a central securities depository under the Uncertificated Securities Regulations. Please contact us directly instead. Prospective applicants may wish to contact us at an early stage for advice on the practical aspects of an application. 
  • Apply to become designated under the Settlement Finality Directive

    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.

  • Applications under Article 54(2) of MiFIR

    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: 

    Timing of applications

    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.

    Format of applications

    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:

    • A description of the exchange-traded derivatives clearing services provided by the CCP, including which trading venues are cleared for, details of the products cleared, average cleared volumes over an indicative period, current levels of open interest and delivery processes.
    • A description of the risk (or risks) that the access rights under Article 35 as regards exchange-traded derivatives would present to the orderly functioning of the CCP. This should include details of how each risk is specific to the CCP, the CCP’s assessment of the probability of the risk crystallising and its assessment of the impact of such crystallisation on the CCP’s ability to continue to operate in compliance with its regulatory requirements and within its existing risk appetite.
    • A discussion of the possible mitigation arrangements available to the CCP to address each risk identified above. This should identify potential arrangements the CCP or the trading venue could implement to mitigate the risk, and the CCP’s rationale for contending that implementation of such mitigation arrangements would either not be effective or would not be proportionate.
    • We may require applicants to provide further detail or clarification. We will discuss this with the applicant if required.

Notifications on selling and buying CCP shares

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).

  • Selling a qualifying holding in a UK CCP

    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:

    1. Details of the current and proposed shareholding in the CCP.
    2. Who the shares are being sold to.
    3. The date the sale is expected to take effect.
  • Acquiring a qualifying holding in a UK CCP

    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.

  • Pre-notifying the Bank of CCP share acquisitions

    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.

    To notify us, email a copy of the acquisition notification form and your supporting documents to FMIInformation@bankofengland.co.uk and send two hard copies to:

    The Director, Financial Market Infrastructure Directorate, Bank of England, 20 Moorgate, London EC2R 6DA.

Crisis information

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.

PDFGuidance on recognised clearing houses for insolvency practitioners

CBEST

FMI whistleblowing and confidential reporting

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 FMI.whistleblowing@bankofengland.co.uk, telephone +44 (0)20 3461 8703 or write to Prudential Regulation Authority CSS (IAWB), 20 Moorgate, London EC2R 6DA.

This page was last updated 24 October 2018
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