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Central securities depositories must meet the requirements of the Uncertificated Securities Regulations 2001 (as amended) as operators in order to operate a system supporting the electronic transfer of titles to UK securities.
Central securities depositories are also regulated under Part 18 of the Financial Services and Markets Act 2000 (FSMA) as recognised central securities depositories.
They must comply with the requirements and obligations set out in Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories (the Central Securities Depositories Regulation (CSDR)). CSDR has been onshored and amended by:
- The Central Securities Depositories (Amendment) (EU Exit) Regulations 2018
- The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019)
Central securities depositories must report their securities financing transactions under the Securities Financing Transactions Regulation.
Central securities depositories may also be regulated under the Banking Act 2009 if the payment arrangements supporting it constitute a recognised payment system.
We have published a Policy Statement and a Supervisory Statement on the Bank of England’s operational resilience expectations for Central Securities Depositories.
In September 2021, the Bank sent a letter to central securities depositories on existing supervisory expectations in relation to material outsourcing arrangements, including the use of public cloud.
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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.
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Recognised clearing houses and central counterparties (CCPs) 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 CCPs must comply with the requirements and obligations set out in Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (European Market Infrastructure Regulation (EMIR)). EMIR has been onshored and amended by:
- The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018
- The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018
- The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019
- The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019
- The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020).
Trade Repository Data collections provide further detail on CCPs’ EMIR Article 9 reporting requirement, and the requirements for CCPs to report securities financing transactions.
They must also comply with the rules for recognised CCPs set by the Bank of England.
Part VII (Financial Markets and Insolvency) of the Companies Act 1989 also imposes certain obligations on recognised bodies (i.e recognised CSD and recognised clearing house), including the requirement to give the Bank of England notice of any proposal to amend, revoke or add to their default rules, and report on the completion of default procedures.
Recognised Clearing House Rules (RCH 1, 2 and 3) Recognised Clearing House Rules Instrument 2018 (RCH 4)Our implementation of ESMA's guidelines and recommendations on CCP interoperability arrangements
Financial penalties we impose under the Financial Services and Markets Act 2000 or under Part 5 of the Banking Act 2009
The giving of directions to qualifying parent undertakings of UK recognised clearing houses
Statutory statements of procedure in respect of our supervision of financial market infrastructures
Financial resources requirements for recognised bodies
Financial Services Authority - PS12/13
We have published a Policy Statement and a Supervisory Statement on the Bank’s operational resilience expectations for Central Counterparties (CCPs)
In September 2021, the Bank sent a letter to central counterparties on existing supervisory expectations in relation to material outsourcing arrangements, including the use of public cloud.
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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.
We have also published a code of practice on governance and a Policy Statement, Supervisory Statement and operational resilience chapter of the Code of Practice for some Recognised Payment System Operators (RPSOs) and Specified Service Providers (SSPs).
In September 2021, the Bank sent a letter to Recognised Payment System Operators (RPSOs) and Specified Service Providers (SSPs) on existing supervisory expectations in relation to material outsourcing arrangements, including the use of public cloud.
Financial penalties we impose under the Financial Services and Markets Act 2000 or under Part 5 of the Banking Act 2009.
The UK has made various legislative changes to ensure a functioning legal framework for financial regulation following the UK’s withdrawal from the EU and the end of the transition period.
The Bank has implemented some of these legal changes, including in relation to FMI rules and FMI-related binding technical standards. We have made these amendments to FMI rules and technical standards via ‘EU Exit Instruments’.
The Bank has also set out its use of the temporary transitional power (TTP) and it has published its transitional direction (the legal instrument that gives effect to this power) in December 2020.
In accordance with the EU (Withdrawal Agreement) Act 2020, the Exit Instruments and transitional direction came into effect at the end of the transition period.
The consultation papers and policy statements published before the end of the transition period relating to changes to FMI rules and binding technical standards, and the TTP, are listed below:
- Joint Bank/PRA CP25/18 ‘The Bank of England’s approach to amending financial services legislation under the European Union (Withdrawal) Act 2018’
- Consultation Paper on ‘UK withdrawal from the EU: Changes to FMI rules and onshored Binding Technical Standards’
- Joint Bank/PRA PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’
- Joint Bank/PRA CP18/19 ‘UK withdrawal from the EU: Changes following extension of Article 50’
- Joint Bank/PRA CP13/20 ‘UK withdrawal from the EU: Changes before the end of the transition period’
- Joint Bank/PRA PS27/20 ‘The Bank of England’s amendment under the European Union (Withdrawal) Act 2018: Changes before the end of the transition period’
We have also published a Joint Bank and PRA Statement of Policy (SoP), which outlines the Bank’s and PRA’s approach to EU Guidelines and Recommendations after the end of the transition period. This statement sets out the expectation for firms and FMIs to continue to make every effort to comply with EU Guidelines and Recommendations to the extent they remain relevant after the end of the transition period. In order to aid firms and FMIs, the appendices of the statement contains links to republished copies of EU Guidelines and Recommendations as at the end of the transition period.
Additional Bank of England materials relating to changes that are relevant to the Bank’s role as FMI competent authority include:
- The EU Exit Instruments amending FMI rules and on-shored Binding Technical Standards.
- The Bank of England’s Supervisory Statement on non-binding Bank materials relating to FMI supervision.
- The General Guidance on the Bank’s transitional direction
- The Guidance on the Bank’s use of the transitional direction as FMI competent authority
There are six main Regulations made by HM Treasury (HMT) which make amendments to the retained EMIR. They are:
- The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018
- The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018
- The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019
- The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019
- The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020
- The Securities Financing Transactions, Securitisation and Miscellaneous Amendments (EU Exit) Regulations 2020
There are two main Regulations made by HMT which make amendments to the retained CSDR. They are:
- The Central Securities Depositories (Amendment) (EU Exit) Regulations 2018
- The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019
There are two main Regulations made by HMT which make amendments to the UK settlement finality regime. They are:
Enforcement powers
We also have enforcement powers under the different legal regimes applicable to FMIs.
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.
Insolvency practitioners’ protocol
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:
- procedures to facilitate coordination and information exchange between IPs and CCPs
- the legal obligations of IPs and CCPs under Part VII of the Companies Act and EMIR (for CCPs)
- the responsibilities of IPs and CCPs in cases where either the special administration regime (SAR) or general administration (under insolvency law) is applied
- practical arrangements for CCPs and IPs to achieve their respective objectives
The protocol is relevant for participants in central clearing including:
- CCPs, clearing members and their clients
- relevant authorities such as the Bank of England, HMT and the FCA
- IP; and any other party that may consider itself affected by the default of a clearing member
Guidance on recognised clearing houses for insolvency practitioners
Regulatory fees
The Bank has statutory powers to require FMIs to pay fees relating to supervisory work and for certain applications.
The Bank levies fees for its FMI supervisory activity and the policy activity which supports this, as permitted by the Bank’s fee powers. This includes the costs of FMI supervision staff together with relevant policy support, specialist resources and corporate services and other costs associated with the work of the FMID. Other areas of activity undertaken by FMID not within the scope of the powers set out above will continue to be funded out of the Bank’s broader budget.
Stablecoin
Stablecoins are a form of digital asset that can be used to make payments. They tend to be less volatile than cryptoassets. That is because their value is tied to other, stable, assets.
The Bank of England has recently published a Discussion Paper setting out its proposed regime for systemic payments systems using stablecoins and related service providers.
This page was last updated 05 March 2024