Financial Stability Standards for 
Securities Settlement Facilities: Comparison to CPSS-IOSCO Principles for Financial Market Infrastructures
Introduction
This document provides a comparison between the new Financial Stability Standards for Securities Settlement Facilities (SSF Standards), and the Principles for Financial Market Infrastructures (the Principles) issued by the Committee for Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO). It is intended to assist readers of the new SSF Standards in understanding where the Reserve Bank has added to and amended the text of the Principles and associated key considerations, by providing a broad indication of variations and changes between the two primary documents. 
Disclaimer: An automated process was used in generating the comparison of the new SSF Standards against the Principles and associated key considerations. While the Reserve Bank has taken due care in compiling this document, it is possible that the comparison contains errors, omissions and inaccuracies introduced through use of the automated process. This document should therefore be used as an aid only. Readers should refer directly to the text of the new SSF Standards and the Principles in order to fully understand the requirements of and differences between the two.
PrincipleStandard 1: Legal basis 
An FMIA securities settlement facility should have a well-founded, clear, transparent, and enforceable legal basis for each material aspect of its activities in all relevant jurisdictions.
Key considerations
1.1	A securities settlement facility should be a legal entity which is separate from other entities that may expose it to risks unrelated to those arising from its function as a securities settlement facility. 
1.2	The legal basis should provide a high degree of certainty for each material aspect of an FMI’sa securities settlement facility’s activities in all relevant jurisdictions. 
1.3	An FMIA securities settlement facility should have rules, procedures, and contracts that are clear, understandable, and consistent with relevant laws and regulations.
1.4	An FMIA securities settlement facility should be able to articulate the legal basis for its activities to the Reserve Bank and other relevant authorities, participants, and, where relevant, participants’ customers, in a clear and understandable way.
1.5	An FMIA securities settlement facility should have rules, procedures, and contracts that are enforceable in all relevant jurisdictions. There should be a high degree of certainty that actions taken by the FMIsecurities settlement facility under such rules and procedures will not be voided, reversed, or subject to stays, including in the event that the securities settlement facility enters into external administration or that one or more of its participants or a settlement bank defaults or is suspended. 
1.6	An FMIA securities settlement facility conducting business in multiple jurisdictions should identify and mitigate the risks arising from any potential conflicts of lawslaw across jurisdictions. A securities settlement facility should provide the Reserve Bank with a legal opinion that demonstrates the enforceability of its rules and addresses relevant conflicts of law across the jurisdictions in which it operates. This should be reviewed on a periodic basis or when material changes occur that may have an impact on the opinion, and updated where appropriate.
PrincipleStandard 2: Governance
An FMIA securities settlement facility should have governance arrangements that are clear and transparent, promote the safety and efficiency of the FMIsecurities settlement facility, and support the stability of the broader financial system, other relevant public interest considerations, and the objectives of relevant stakeholders.
Key considerations
2.1	An FMIA securities settlement facility should have objectives that place a high priority on the safety and efficiency of the FMIsecurities settlement facility and explicitly support the stability of the financial stabilitysystem and other relevant public interest considerations.
2.2	An FMIA securities settlement facility should have documented governance arrangements that provide clear and direct lines of responsibility and accountability. These arrangements should be disclosed to owners, the Reserve Bank and other relevant authorities, participants, and, at a more general level, the public. 
2.3	The roles and responsibilities of an FMI’sa securities settlement facility’s board of directors (or equivalent) should be clearly specified, and there should be documented procedures for its functioning, including procedures to identify, address, and manage member conflicts of interest. The board should regularly review both its overall performance and the performance of its individual board members regularly.
2.4	The board should containcomprise suitable members with the appropriate skills and incentives to fulfil its multiple roles. This typically requires the inclusion of non-executive board member(s). 
2.5	The roles and responsibilities of management should be clearly specified. An FMI’sA securities settlement facility’s management should have the appropriate experience, a mix of skills, and the integrity necessary to effectively discharge theirits responsibilities for the operation and risk management of the FMIsecurities settlement facility. Compensation arrangements should be structured in such a way as to promote the soundness and effectiveness of risk management.
2.6	The board should establish a clear, documented risk -management framework that includes the FMI’ssecurities settlement facility’s risk -tolerance policy, assigns responsibilities and accountability for risk decisions, and addresses decision-making in crises and emergencies. Governance arrangements should ensure that the risk -management and internal control functions have sufficient authority, independence, resources, and access to the board, including through the maintenance of a separate and independent internal audit function. 
2.7	A securities settlement facility’s operations, risk management processes, internal control mechanisms and accounts should be subject to internal audit and, where appropriate, periodic independent expert reviews. Internal audits should be performed, at a minimum, on an annual basis. The outcome of internal audits and external reviews should be notified to the Reserve Bank and other relevant authorities.
2.8	The boardGovernance arrangements should ensure that the FMI’ssecurities settlement facility’s design, rules, overall strategy, and major decisions reflect appropriately the legitimate interests of its direct and indirect participants and other relevant stakeholders. Governance arrangements should provide for consultation and stakeholder engagement through appropriate forums on operational arrangements, risk controls and default management rules and procedures. Major decisions should be clearly disclosed to relevant stakeholders and, where there is a broad market impact, the public.
2.9	A securities settlement facility that is part of a group of companies should ensure that measures are in place such that decisions taken in accordance with its obligations as a securities settlement facility cannot be compromised by the group structure or by board members also being members of the board of other entities in the same group. In particular, such a securities settlement facility should consider specific procedures for preventing and managing conflicts of interest, including with respect to intragroup outsourcing arrangements. 
PrincipleStandard 3: Framework for the comprehensive management of risks 
An FMIA securities settlement facility should have a sound risk -management framework for comprehensively managing legal, credit, liquidity, operational, and other risks.
Key considerations
3.1	An FMIA securities settlement facility should have risk -management policies, procedures, and systems that enable it to identify, measure, monitor, and manage the range of risks that arise in or are borne by the FMI.securities settlement facility. This risk -management frameworksframework should be subject to periodic review.
3.2	A securities settlement facility should ensure that financial and other obligations imposed on participants under its risk management framework are proportional to the scale and nature of individual participants’ activities. 
3.3	An FMIA securities settlement facility should provide incentives to participants and, where relevant, their customers to manage and contain the risks they pose to the FMIsecurities settlement facility. 
3.4	An FMIA securities settlement facility should regularly review the material risks it bears from and poses to other entities (such as other FMIs, money settlement settlement banksagents, liquidity providers, and service providers) as a result of interdependencies, and develop appropriate risk -management tools to address these risks.
3.5	An FMIA securities settlement facility should identify scenarios that may potentially prevent it from being able to provide its critical operations and services as a going concern and assess the effectiveness of a full range of options for recovery or orderly wind-down. An FMIA securities settlement facility should prepare appropriate plans for its recovery or orderly wind-down based on the results of that assessment. Where applicable, an FMIa securities settlement facility should also provide relevant authorities with the information needed for purposes of resolution planning. 
PrincipleStandard 4: Credit risk
[Key Considerations 4, 5 and 6 not relevant to securities settlement facilities]
An FMIA securities settlement facility should effectively measure, monitor, and manage its credit exposures to participants and those arising from its payment, clearing, and settlement processes. An FMIA securities settlement facility should maintain sufficient financial resources to cover its credit exposure to each participant fully with a high degree of confidence. In addition, a CCP that is involved in activities with a more-complex risk profile or that is systemically important in multiple jurisdictions should maintain additional financial resources sufficient to cover a wide range of potential stress scenarios that should include, but not be limited to, the default of the two participants and their affiliates that would potentially cause the largest aggregate credit exposure to the CCP in extreme but plausible market conditions. All other CCPs should maintain additional financial resources sufficient to cover a wide range of potential stress scenarios that should include, but not be limited to, the default of the participant and its affiliates that would potentially cause the largest aggregate credit exposure to the CCP in extreme but plausible market conditions.
Key considerations
4.1	An FMIA securities settlement facility should establish a robust framework to manage its credit exposures to its participants and the credit risks arising from its payment, clearing, and settlement processes. Credit exposures may arise from current exposures, potential future exposures, or both.
4.2	An FMIA securities settlement facility should identify sources of credit risk, routinely measure and monitor credit exposures, and use appropriate risk -management tools to control these risks. To assist in this process, a securities settlement facility should ensure it has the capacity to calculate exposures to participants on a timely basis as required, and to receive and review timely and accurate information on participants’ credit standing. 
4.3	A securities settlement facility should have the authority to impose activity restrictions or additional credit risk controls on a participant in situations where the securities settlement facility determines that the participant’s credit standing may be in doubt. 
4.4	A payment system or SSSA securities settlement facility should cover its current and, where they exist, potential future exposures to each participant fully with a high degree of confidence using collateral and other equivalent financial resources (see PrincipleSSF Standard 5 on collateral). In the case of a deferred net settlement (DNS payment system or DNS SSS) securities settlement facility in which there is no settlement guarantee, but where its participants face credit exposures arising from its payment, clearing, and settlement processes, such an FMI the facility should maintain, at a minimum, sufficient resources to cover the exposures of the two participants and their affiliates that would create the largest aggregate credit exposure in the system.
4.5	An FMIA securities settlement facility should establish explicit rules and procedures that address fully any credit losses it may face as a result of any individual or combined default among its participants with respect to any of their obligations to the FMI.securities settlement facility. These rules and procedures should address how potentially uncovered credit losses would be allocated, including the repayment of any funds an FMIa securities settlement facility may borrow from liquidity providers. These rules and procedures should also indicate the FMI’ssecurities settlement facility’s process to replenish any financial resources that the FMIsecurities settlement facility may employ during a stress event, so that the FMIsecurities settlement facility can continue to operate in a safe and sound manner.
PrincipleStandard 5: Collateral 
An FMIA securities settlement facility that requires collateral to manage its or its participants’ credit exposures should accept collateral with low credit, liquidity, and market risks. An FMIA securities settlement facility should also set and enforce appropriately conservative haircuts and concentration limits.
Key considerations
5.1	An FMIA securities settlement facility should generally limit the assets it (routinely) accepts as collateral to those with low credit, liquidity, and market risks. 
5.2	In determining its collateral policies, a securities settlement facility should take into consideration the broad effect of these policies on the market. As part of this, a securities settlement facility should consider allowing the use of collateral commonly accepted in the relevant jurisdictions in which it operates.
5.3	An FMIA securities settlement facility should establish prudent valuation practices and develop haircuts that are regularly tested and take into account stressed market conditions. 
5.4	In order to reduce the need for procyclical adjustments, an FMIa securities settlement facility should establish stable and conservative haircuts that are calibrated to include periods of stressed market conditions, to the extent practicable and prudent.
5.5	An FMIA securities settlement facility should avoid concentrated holdings of certain assets where this would significantly impair the ability to liquidate such assets quickly without significant adverse price effects. 
5.6	An FMIA securities settlement facility that accepts cross-border collateral should mitigate the risks associated with its use and ensure that the collateral can be used in a timely manner.
5.7	An FMIA securities settlement facility should use a collateral management system that is well -designed and operationally flexible. 
[Principle 6 on margin not relevant to securities settlement facilities]
Principle 7Standard 6: Liquidity risk 
[Key Consideration 4 not relevant to securities settlement facilities]
An FMIA securities settlement facility should effectively measure, monitor, and manage its liquidity risk. An FMIA securities settlement facility should maintain sufficient liquid resources in all relevant currencies to effect same-day and, where appropriate, intraday and multiday settlement of payment obligations with a high degree of confidence under a wide range of potential stress scenarios that should include, but not be limited to, the default of the participant and its affiliates that would generate the largest aggregate liquidity obligation for the FMIsecurities settlement facility in extreme but plausible market conditions. 
Key considerations
6.1	An FMIA securities settlement facility should have a robust framework to manage its liquidity risks from its participants, commercial bank money settlement settlement banks, agents, nostro agents, custodian bankscustodians, liquidity providers, and other entities. 
6.2	An FMIA securities settlement facility should have effective operational and analytical tools to identify, measure, and monitor its settlement and funding flows on an ongoing and timely basis, including its use of intraday liquidity. 
6.3	A payment system or SSSA securities settlement facility, including one employing a DNS mechanism, should maintain sufficient liquid resources in all relevant currencies to effect same-day settlement, and, where appropriate, intraday or multiday settlement, of payment obligations with a high degree of confidence under a wide range of potential stress scenarios that should include, but not be limited to, the default of the participant and its affiliates that would generate the largest aggregate payment obligation in extreme but plausible market conditions. 
6.4	For the purpose of meeting its minimum liquid resource requirement, an FMI’sa securities settlement facility’s qualifying liquid resources in each currency include cash at the central bank of issue and at creditworthy commercial banks, committed lines of credit, committed foreign exchange swaps, and committed repos, as well as highly marketable collateral held in custody and investments that are readily available and convertible into cash with prearranged and highly reliable funding arrangements, even in extreme but plausible market conditions. If an FMIa securities settlement facility has access to routine credit at the central bank of issue, the FMIsecurities settlement facility may count such access as part of the minimum requirement to the extent it has collateral that is eligible for pledging to (or for conducting other appropriate forms of transactions with) the relevant central bank. All such resources should be available when needed. 
6.5	An FMIA securities settlement facility may supplement its qualifying liquid resources with other forms of liquid resources. If the FMIsecurities settlement facility does so, then these liquid resources should be in the form of assets that are likely to be saleable or acceptable as collateral for lines of credit, swaps, or repos on an ad hoc basis following a default, even if this cannot be reliably prearranged or guaranteed in extreme market conditions. Even if an FMIa securities settlement facility does not have access to routine central bank credit, it should still take account of what collateral is typically accepted by the relevant central bank, as such assets may be more likely to be liquid in stressed circumstances. An FMIA securities settlement facility should not assume the availability of emergency central bank credit as a part of its liquidity plan.
6.6	An FMIA securities settlement facility should obtain a high degree of confidence, through rigorous due diligence, that each provider of its minimum required qualifying liquid resources, whether a participant of the FMIsecurities settlement facility or an external party, has sufficient information to understand and to manage its associated liquidity risks, and that it has the capacity to perform as required under its commitment. Where relevant to assessing a liquidity provider’s performance reliability with respect to a particular currency, a liquidity provider’s potential access to credit from the central bank of issue may be taken into account. An FMIA securities settlement facility should regularly test its procedures for accessing its liquid resources at a liquidity provider. 
6.7	An FMIA securities settlement facility with access to central bank accounts, payment services, or securities services should use these services, where practical, to enhance its management of liquidity risk. 
6.8	An FMIA securities settlement facility should determine the amount and regularly test the sufficiency of its liquid resources through rigorous stress testing. An FMIA securities settlement facility should have clear procedures to report the results of its stress tests to appropriate decision-makers at the FMIsecurities settlement facility and to use these results to evaluate the adequacy of, and adjust, its liquidity risk -management framework. In conducting stress testing, an FMIa securities settlement facility should consider a wide range of relevant scenarios. Scenarios should include relevant peak historic price volatilities, shifts in other market factors such as price determinants and yield curves, multiple defaults over various time horizons, simultaneous pressures in funding and asset markets, and a spectrum of forward-looking stress scenarios in a variety of extreme but plausible market conditions. Scenarios should also take into account the design and operation of the FMIsecurities settlement facility, include all entities that might pose material liquidity risks to the FMIsecurities settlement facility (such as commercial bank money settlement agents settlement banks, nostro agents, custodian bankscustodians, liquidity providers, and linked FMIs),) and, where appropriate, cover a multiday period. In all cases, an FMIa securities settlement facility should document its supporting rationale for, and should have appropriate governance arrangements relating to, the amount and form of total liquid resources it maintains.
6.9	An FMIA securities settlement facility should establish explicit rules and procedures that enable the FMIsecurities settlement facility to effect same-day and, where appropriate, intraday and multiday settlement of payment obligations on time following any individual or combined default among its participants. These rules and procedures should address unforeseen and potentially uncovered liquidity shortfalls and should aim to avoid unwinding, revoking, or delaying the same-day settlement of payment obligations. These rules and procedures should also indicate the FMI’ssecurities settlement facility’s process to replenish any liquidity resources it may employ during a stress event, so that it can continue to operate in a safe and sound manner.
Principle 8Standard 7: Settlement finality 
An FMIA securities settlement facility should provide clear and certain final settlement, at a minimum by the end of the value date. Where necessary or preferable, an FMIa securities settlement facility should provide final settlement intraday or in real time.
Key considerations
7.1	An FMI’sA securities settlement facility’s rules and procedures should clearly define the point at which settlement is final. 
7.2	An FMIThe securities settlement facility should complete final settlement no later than the end of the value date, and preferably intraday or in real time, to reduce settlement risk. An LVPS or SSSA securities settlement facility should consider adopting real-time gross settlement (RTGS) or multiple -batch processing during the settlement day. 
7.3	An FMIA securities settlement facility should clearly define the point after which unsettled payments, transfer instructions, or other obligations may not be revoked by a participant.
Principle 9Standard 8: Money settlements 
An FMIA securities settlement facility should conduct its money settlements in central bank money where practical and available. If central bank money is not used, an FMIa securities settlement facility should minimise and strictly control the credit and liquidity risk arising from the use of commercial bank money.
Key considerations
8.1	An FMIA securities settlement facility should conduct its money settlements in central bank money, where practical and available, to avoid credit and liquidity risks.
8.2	If central bank money is not used, an FMIa securities settlement facility should conduct its money settlements using a settlement asset with little or no credit or liquidity risk. 
8.3	If an FMI a securities settlement facility settles in commercial bank money, or its participants effect settlements using commercial settlement banks, it should monitor, manage, and limit its credit and liquidity risks arising from the commercial bank money settlement agents and commercial settlement banks. In particular, an FMIa securities settlement facility should establish and monitor adherence to strict criteria for commercial banks appropriate to their role in the settlement process,its settlement banks that take taking account of, among other things, matters such as their regulation and supervision, creditworthiness, capitalisation, access to liquidity, and operational reliability. An FMIA securities settlement facility should also monitor and manage the concentration of its and its participants’ credit and liquidity exposures to itscommercial bank money settlement agents and commercial settlement banks.
8.4	If an FMI a securities settlement facility conducts money settlements on its own books, it should minimise and strictly control its credit and liquidity risks.
8.5	An FMI’sA securities settlement facility’s legal agreements with any commercial bank money settlement agents settlement banks should state clearly when transfers on the books of the relevant commercial individual settlement banksbank are expected to occur, that transfers are to be final when effected, and that funds received should be transferable as soon as possible, at a minimum by the end of the day and ideally intraday, in order to enable the FMIsecurities settlement facility and its participants to manage credit and liquidity risks. 
[Principle 10 on physical deliveries not relevant to securities settlement facilities that settle immobilised or dematerialised securities]
Principle 11Standard 9: Central securities depositories 
A CSD securities settlement facility operating a central securities depository should have appropriate rules and procedures to help ensure the integrity of securities issues and minimise and manage the risks associated with the safekeeping and transfer of securities. A CSD securities settlement facility operating a central securities depository should maintain securities in an immobilised or dematerialised form for their transfer by book entry.
Key considerations
9.1	A CSD securities settlement facility operating a central securities depository should have appropriate rules, procedures, and controls, including robust accounting practices, to safeguard the rights of securities issuers and holders, prevent the unauthorised creation or deletion of securities, and conduct periodic and at least daily reconciliation of securities issues it maintains. These rules and procedures should: 
(a)		identify the type of title or interest held by participants for particular securities, to the extent such title or interest is recognised by the facility’s rules and procedures;
(b)		clearly identify the way in which the transfer of (or any other forms of dealing with) securities and related payments can be effected through the facility; and
(c)		ensure that, to the extent permissible by law, the creditors of the operator of the securities settlement facility have no claim over securities or other assets held, deposited or registered by participants in the facility.
9.2	A CSD A securities settlement facility operating a central securities depository should prohibit overdrafts and debit balances in securities accounts.
9.3	A CSD securities settlement facility operating a central securities depository should maintain securities in an immobilised or dematerialised form for their transfer by book entry. Where appropriate, a CSDsecurities settlement facility operating a central securities depository should provide incentives to immobilise or dematerialise securities. 
9.4	A CSD securities settlement facility operating a central securities depository should protect assets against custody risk through appropriate rules and procedures consistent with its legal framework. 
9.5	A CSD A securities settlement facility operating a central securities depository should employ a robust system that ensures segregation between the CSD’sits own assets and the securities of its participants, and segregation among the securities of participants. Where supported by the legal framework, the CSDa securities settlement facility operating a central securities depository should also support operationally the segregation of securities belonging to a participant’s customers on the participant’s books and facilitate the transfer of customer holdings.
9.6	A CSD A securities settlement facility operating a central securities depository should identify, measure, monitor, and manage its risks from other activities that it may perform; additional tools may be necessary in order to address these risks. 
Principle 12Standard 10: Exchange-of-value settlement systems
If an FMI a securities settlement facility settles transactions that involvecomprise the settlement of two linked obligations (for example, securities or foreign exchange transactions), it should eliminate principal risk by conditioning the final settlement of one obligation upon the final settlement of the other. 
Key consideration
10.1	An FMIA securities settlement facility that is an exchange-of-value settlement system should eliminate principal risk by ensuring that the final settlement of one obligation occurs if and only if the final settlement of the linked obligation also occurs, regardless of whether the FMIsecurities settlement facility settles on a gross or net basis and when finality occurs. 
10.2	A securities settlement facility that is an exchange-of-value settlement system should eliminate principal risk by linking the final settlement of one obligation to the final settlement of the other through an appropriate delivery versus payment (DvP), delivery versus delivery (DvD) or payment versus payment (PvP) settlement mechanism.
Principle 13Standard 11: Participant -default rules and procedures 
An FMIA securities settlement facility should have effective and clearly defined rules and procedures to manage a participant default. These rules and procedures should be designed to ensure that the FMIsecurities settlement facility can take timely action to contain losses and liquidity pressures and continue to meet its obligations. 
Key considerations
11.1	An FMIA securities settlement facility should have default rules and procedures that enable the FMIsecurities settlement facility to continue to meet its obligations in the event of a participant default and that address the replenishment of resources following a default. A securities settlement facility should ensure that financial and other obligations created for non-defaulting participants in the event of a participant default are proportional to the scale and nature of individual participants’ activities.
11.2	An FMIA securities settlement facility should be well prepared to implement its default rules and procedures, including any appropriate discretionary procedures provided for in its rules. This requires that the securities settlement facility should:
(a)	require its participants to inform it immediately if they:
(i)		become subject to, or become aware of the likelihood of external administration, or have reasonable grounds for suspecting that they will become subject to external administration; or
(ii)		have breached, or are likely to breach, a risk control requirement of the securities settlement facility; 
(b)	allow for the cancellation or suspension of a participant or commercial settlement bank from the securities settlement facility:
(i)		if the participant or commercial settlement bank is in external administration; or
(ii)		if there is a reasonable suspicion that the participant or commercial settlement bank may become subject to external administration; and 
(c)		allow participant users of a commercial settlement bank which becomes subject to external administration, or which is reasonably likely to become subject to external administration, to quickly nominate a new commercial settlement bank.
11.3	An FMIA securities settlement facility should publicly disclose key aspects of its default rules and procedures. Where a securities settlement facility settles via a multilateral net batch, arrangements for dealing with any unsettled trades of a defaulting participant that are not guaranteed by a central counterparty, such as reconstituting the multilateral net batch excluding the settlement obligations of the defaulting participant, should be clear to all its participants and should be capable of being executed in a timely manner.
11.4	An FMIA securities settlement facility should involve its participants and other stakeholders in the testing and review of the FMI’ssecurities settlement facility’s default procedures, including any close-out procedures.. Such testing and review should be conducted at least annually orand following material changes to the rules and procedures to ensure that they are practical and effective. 
11.5	A securities settlement facility should demonstrate that its default management procedures take appropriate account of interests in relevant jurisdictions and, in particular, any implications for pricing, liquidity and stability in relevant financial markets. 
[Principle 14 on segregation and portability not relevant to securities settlement facilities]
Principle 15Standard 12: General business risk
An FMIA securities settlement facility should identify, monitor, and manage its general business risk and hold, or demonstrate that it has legally certain access to, sufficient liquid net assets funded by equity to cover potential general business losses so that it can continue operations and services as a going concern if those losses materialise. Further, liquid net assets should at all times be sufficient to ensure a recovery or orderly wind-down of critical operations and services.
Key considerations
12.1	An FMIA securities settlement facility should have robust management and control systems to identify, monitor, and manage general business risks, including losses from poor execution of business strategy, negative cash flows, or unexpected and excessively large operating expenses.
12.2	An FMIA securities settlement facility should hold, or demonstrate that it has legally certain access to, liquid net assets funded by equity (such as common stock, disclosed reserves, or other retained earnings) so that it can continue operations and services as a going concern if it incurs general business losses. The amount of liquid net assets funded by equity an FMIa securities settlement facility should hold, or have access to, should be determined by its general business risk profile and the length of time required to achieve a recovery or orderly wind-down, as appropriate, of its critical operations and services if such action is taken.
12.3	An FMIA securities settlement facility should maintain a viable recovery or orderly wind-down plan and should hold, or have legally certain access to, sufficient liquid net assets funded by equity to implement this plan. At a minimum, an FMIa securities settlement facility should hold, or have legally certain access to, liquid net assets funded by equity equal to at least six months of current operating expenses. These assets are in addition to resources held to cover participant defaults or other risks covered under the financial resources principles.SSF Standard 4 on credit risk and SSF Standard 6 on liquidity risk. However, equity held under international risk-based capital standards can be included where relevant and appropriate to avoid duplicate capital requirements. 
12.4	Assets held to cover general business risk should be of high quality and sufficiently liquid in order to allow the FMIsecurities settlement facility to meet its current and projected operating expenses under a range of scenarios, including in adverse market conditions.
12.5	An FMIA securities settlement facility should maintain a viable plan for raising additional equity should its equity fall close to or below the amount needed. This plan should be approved by the board of directors and updated regularly.
Principle 16Standard 13: Custody and investment risks
An FMIA securities settlement facility should safeguard its own and its participants’ assets and minimise the risk of loss on and delay in access to these assets. An FMI’sA securities settlement facility’s investments should be in instruments with minimal credit, market, and liquidity risks.
Key considerations
13.1	An FMIA securities settlement facility should hold its own and its participants’ assets at supervised and regulated entities that have robust accounting practices, safekeeping procedures, and internal controls that fully protect these assets.
13.2	An FMIA securities settlement facility should have prompt access to its assets and the assets provided by participants, when required.
13.3	An FMIA securities settlement facility should evaluate and understand its exposures to its custodian bankscustodians, taking into account the full scope of its relationships with each.
13.4	An FMI’sA securities settlement facility’s investment strategy should be consistent with its overall risk -management strategy and fully disclosed to its participants, and investments should be secured by, or be claims on, high-quality obligors. These investments should allow for quick liquidation with little, if any, adverse price effect.
Principle 17Standard 14: Operational risk
[Key Considerations 4 and 5 both incorporated into SSF Standard 14.3]
An FMIA securities settlement facility should identify the plausible sources of operational risk, both internal and external, and mitigate their impact through the use of appropriate systems, policies, procedures, and controls. Systems should be designed to ensure a high degree of security and operational reliability and should have adequate, scalable capacity. Business continuity management should aim for timely recovery of operations and fulfilment of the FMI’ssecurities settlement facility’s obligations, including in the event of a wide-scale or major disruption.
Key considerations
Identifying and managing operational risk
14.1	An FMIA securities settlement facility should establish a robust operational risk -management framework with appropriate systems, policies, procedures, and controls to identify, monitor, and manage operational risks.
14.2	An FMI’sA securities settlement facility’s board of directors should clearly define the roles and responsibilities for addressing operational risk and should endorse the FMI’ssecurities settlement facility’s operational risk -management framework. Systems, operational policies, procedures, and controls should be reviewed, audited, and tested periodically and after significant changes.
14.3	An FMIA securities settlement facility should have clearly defined operational reliability objectives and should have policies in place that are designed to achieve those objectives. These policies include, but are not limited to, having: exacting targets for system availability; scalable capacity adequate to handle increasing stress volumes; and comprehensive physical and information security policies that address all potential vulnerabilities and threats. 
14.4	A securities settlement facility should ensure that it can reliably access and utilise well-trained and competent personnel, as well as technical and other resources. These arrangements should be designed to ensure that all key systems are operated securely and reliably in all circumstances, including where a related body becomes subject to external administration.
14.5	An FMIA securities settlement facility should identify, monitor, and manage the risks that key participants, other FMIs, and service and utility providers might pose to its operations. A securities settlement facility should inform the Reserve Bank of any critical dependencies on utilities or service providers. In addition, an FMIa securities settlement facility should identify, monitor, and manage the risks its operations might pose to its participants and other FMIs. Where a securities settlement facility operates in multiple jurisdictions, managing these risks may require it to provide adequate operational support to participants during the market hours of each relevant jurisdiction. 
14.6	A participant of a securities settlement facility should have complementary operational and business continuity arrangements that are appropriate to the nature and size of the business undertaken by that participant. The securities settlement facility’s rules and procedures should clearly specify operational requirements for participants. 
Business continuity arrangements
14.7	An FMIA securities settlement facility should have a business continuity plan that addresses events posing a significant risk of disrupting operations, including events that could cause a wide-scale or major disruption. The plan should incorporate the use of a secondary site and should be designed to ensure that critical information technology (IT) systems can resume operations within two hours following disruptive events. TheBusiness continuity arrangements should provide appropriate redundancy of critical systems and appropriate mitigants for data loss. The business continuity plan should be designed to enable the FMIsecurities settlement facility to complete settlement by the end of the day of the disruption, even in case of extreme circumstances. The FMIsecurities settlement facility should regularly test these arrangements. 
14.8	A securities settlement facility should consider making contingency testing compulsory for the largest participants to ensure they are operationally reliable and have in place tested contingency arrangements to deal with a range of operational stress scenarios that may include impaired access to the securities settlement facility.
Outsourcing and other dependencies
14.9	A securities settlement facility that relies upon, outsources some of its operations to, or has other dependencies with a related body, another FMI or a third-party service provider (for example, data processing and information systems management) should ensure that those operations meet the resilience, security and operational performance requirements of these SSF Standards and equivalent requirements of any other jurisdictions in which it operates.
14.10	All of a securities settlement facility’s outsourcing or critical service provision arrangements should provide rights of access to the Reserve Bank to obtain sufficient information regarding the service provider’s operation of any critical functions provided. A securities settlement facility should consult with the Reserve Bank prior to entering into an outsourcing or service provision arrangement for critical functions.
14.11	A securities settlement facility should organise its operations, including any outsourcing or critical service provision arrangements, in such a way as to ensure continuity of service in a crisis and to facilitate effective crisis management actions by the Reserve Bank or other relevant authorities. These arrangements should be commensurate with the nature and scale of the securities settlement facility’s operations.
Principle 18Standard 15: Access and participation requirements 
An FMIA securities settlement facility should have objective, risk-based, and publicly disclosed criteria for participation, which permit fair and open access.
Key considerations
15.1	An FMIA securities settlement facility should allow for fair and open access to its services, including by direct and, where relevant, indirect participants and other FMIs, based on reasonable risk-related participation requirements.
15.2	An FMI’sA securities settlement facility’s participation requirements should be justified in terms of the safety and efficiency of the FMIsecurities settlement facility and the markets it serves, be tailored to and commensurate with the FMI’ssecurities settlement facility’s specific risks, and be publicly disclosed. Subject to maintaining acceptable risk control standards, an FMIa securities settlement facility should endeavour to set requirements that have the least -restrictive impact on access that circumstances permit.
15.3	An FMIA securities settlement facility should monitor compliance with its participation requirements on an ongoing basis and have clearly defined and publicly disclosed procedures for facilitating the suspension and orderly exit of a participant that breaches, or no longer meets, the participation requirements. 
Principle 19Standard 16: Tiered participation arrangements
An FMIA securities settlement facility should identify, monitor, and manage the material risks to the FMIsecurities settlement facility arising from tiered participation arrangements.
Key considerations
16.1	An FMIA securities settlement facility should ensure that its rules, procedures, and agreements allow it to gather basic information about indirect participation in order to identify, monitor, and manage any material risks to the FMIsecurities settlement facility arising from such tiered participation arrangements. 
16.2	An FMIA securities settlement facility should identify material dependencies between direct and indirect participants that might affect the FMIsecurities settlement facility. 
16.3	An FMIA securities settlement facility should identify indirect participants responsible for a significant proportion of transactions processed by the FMIsecurities settlement facility and indirect participants whose transaction volumes or values are large relative to the capacity of the direct participants through which they access the FMIsecurities settlement facility in order to manage the risks arising from these transactions. 
16.4	An FMIA securities settlement facility should regularly review risks arising from tiered participation arrangements and should take mitigating action when appropriate. 
Principle 20Standard 17: FMI links
[Key Consideration 5 not directly relevant to financial stability; Key Considerations 7, 8, and 9 not relevant to securities settlement facilities]
An FMIA securities settlement facility that establishes a link with one or more FMIs should identify, monitor, and manage link-related risks.
Key considerations
17.1	Before entering into a link arrangement, and on an ongoing basis once the link is established, an FMIa securities settlement facility should identify, monitor, and manage all potential sources of risk arising from the link arrangement. Link arrangements should be designed such that each FMIthe securities settlement facility is able to observe the other principles in this reportcomply with these SSF Standards. 
17.2	A link should have a well-founded legal basis, in all relevant jurisdictions, that supports its design and provides adequate protection to the securities settlement facility and other FMIs involved in the link. 
17.3	Where relevant to its operations in Australia, a securities settlement facility should consult with the Reserve Bank prior to entering into a link arrangement with another FMI. 
17.4	Linked CSDsA securities settlement facility operating a central securities depository that links to another central securities depository should measure, monitor, and manage the credit and liquidity risks arising from each othersuch links. Any credit extensions between CSDsextended to the linked central securities depository should be covered fully with high-quality collateral and be subject to limits. 
17.5	Provisional transfers of securities between linked CSDsa securities settlement facility operating a central securities depository and another central securities depository should be prohibited or, at a minimum, the retransfer of provisionally transferred securities should be prohibited prior to the transfer becoming final.
17.6	An investor CSDA securities settlement facility operating an investor central securities depository that uses an intermediary to operate a link with an issuer CSDcentral securities depository should measure, monitor, and manage the additional risks (including custody, credit, legal, and operational risks) arising from the use of the intermediary.
[Principle 21 on efficiency and effectiveness not directly relevant to financial stability]
[Principle 22 on communication procedures and standards not directly relevant to financial stability]
Principle 23Standard 18: Disclosure of rules, key policies and procedures, and market data
[Key Consideration 4 not directly relevant to financial stability]
An FMIA securities settlement facility should have clear and comprehensive rules, policies and procedures and should provide sufficient information and data to enable participants to have an accurate understanding of the risks, fees, and other material costs they incur by participating in the FMI.securities settlement facility. All relevant rules and key policies and procedures should be publicly disclosed.
Key considerations
18.1	An FMIA securities settlement facility should adopt clear and comprehensive rules, policies and procedures that are fully disclosed to participants. Relevant rules and key policies and procedures should also be publicly disclosed (including specific requirements relating to SSF Standards 1.4, 2.2, 11.3, 13.4, 15.2 and 15.3). 
18.2	An FMIA securities settlement facility should disclose clear descriptions of the system’s design and operations, as well as the FMI’ssecurities settlement facility’s and participants’ rights and obligations, so that participants can assess the risks they would incur by participating in the FMI.securities settlement facility (see SSF Standards 2.8 and 8.5). 
18.3	An FMIA securities settlement facility should provide all necessary and appropriate documentation and training to facilitate participants’ understanding of the FMI’ssecurities settlement facility’s rules, policies and procedures and the risks they face from participating in the FMIsecurities settlement facility.
18.4	An FMIA securities settlement facility should complete regularly and disclose publicly responses to the CPSS-IOSCO Disclosure Framework for Financial Market Infrastructures. An FMIA securities settlement facility also should, at a minimum, disclose basic data on transaction volumesrisk and valuesactivity data, as directed by the Reserve Bank from time to time.
 [Principle 24 on disclosure of market data by trade repositories not relevant to securities settlement facilities]
Standard 19: Regulatory reporting
A securities settlement facility should inform the Reserve Bank in a timely manner of any events or changes to its operations or circumstances that may materially impact its management of risks or ability to continue operations. A securities settlement facility should also regularly provide information to the Reserve Bank regarding its financial position and risk controls on a timely basis.
19.1	A securities settlement facility should inform the Reserve Bank as soon as reasonably practicable if:
(a)	it breaches, or has reason to believe that it will breach:
(i)		an SSF Standard; or 
(ii)		its broader legislative obligation to do, to the extent that it is reasonably practicable to do so, all things necessary to reduce systemic risk; 
(b)	it becomes subject to external administration, or has reasonable grounds for suspecting that it will become subject to external administration; 
(c)	a related body to the securities settlement facility becomes subject to external administration, or if the securities settlement facility has reasonable grounds for suspecting that a related body will become subject to external administration; 
(d)	a participant becomes subject to external administration, or if the securities settlement facility has reasonable grounds for suspecting that a participant will become subject to external administration; 
(e)	a participant fails to meet its obligations under the securities settlement facility’s risk control requirements or has its participation suspended or cancelled because of a failure to meet the securities settlement facility’s risk control requirements; 
(f)	it fails to enforce any of its own risk control requirements; 
(g)	it plans to make significant changes to its risk control requirements or its rules, policies and procedures; 
(h)	it or a service it relies on from a third party or outsourced provider experiences a significant operational disruption, including providing the conclusions of its post-incident review;
(i)	any internal audits or independent external expert reviews are undertaken of its operations, risk management processes or internal control mechanisms, including providing the conclusions of such audits or reviews;
(j)	its operations or risk controls are affected, or are likely to be affected, by distress in financial markets;
(k)	it has critical dependencies on utilities or service providers, including providing a description of the dependency and an update if the nature of this relationship changes;
(l)	it proposes to grant a security interest over its assets (other than a lien, right of retention or statutory charge that arises in the ordinary course of business); 
(m)	it proposes to incur or permit to subsist any loans from participants or members unless such loans are subordinated to the claims of all other creditors of the securities settlement facility; or 
(n)	any other matter arises which has or is likely to have a significant impact on its risk control arrangements (see also SSF Standards 1.6, 14.10 and 17.3). 
19.2	A securities settlement facility should also provide to the Reserve Bank, on a timely basis:
(a)	audited annual accounts;
(b)	management accounts on a regular basis, and at least quarterly; 
(c)	risk management reports on a regular basis, and at least quarterly;
(d)	periodic activity, risk and operational data, as agreed with the Reserve Bank; and
(e)	any other information as specified by the Reserve Bank from time to time.