Financial Stability Standards for Securities Settlement Facilities – December 2012 Introduction for Standards

Download the Standards 744KB and Guidance 1MB

Note: The headline standard and numbered ‘sub’-standards determined under section 827D(1) of the Corporations Act 2001 have been formatted in bold text while the guidance to these standards has been formatted as plain text. For more information see the Introduction for Standards and Introduction for Guidance. Although the Reserve Bank has taken due care in compiling this page, the published version of the Standards and Guidance should be used in the case of any differences between the two.

The Financial Stability Standards for Securities Settlement Facilities (SSF Standards) are determined under section 827D(1) of the Corporations Act 2001 (the Act). The SSF Standards apply to all holders of an Australian Clearing and Settlement (CS) Facility Licence, under Part 7.3 of the Act, that operate a securities settlement facility, unless:

  1. Subject to paragraph (b), the value of financial obligations settled through the facility in a financial year does not exceed a threshold value of $200 million.
  2. When this threshold is exceeded for the first time, the operator of the facility must notify the Reserve Bank of Australia (Reserve Bank) immediately. The operator of the facility must then meet the SSF Standards during the next and each subsequent financial year. Transitional arrangements will be discussed and agreed with the Reserve Bank or, failing agreement, determined by the Reserve Bank.

Separate financial stability standards apply to CS facility licensees that operate a central counterparty. For the purposes of the SSF Standards, a securities settlement facility is a CS facility operated by an Australian CS facility licensee that enables its participants to transfer title to or other interests in securities, typically in return for payment. A securities settlement facility may also operate a central securities depository. Unless the contrary intention appears, obligations on a securities settlement facility arising from the SSF Standards should be interpreted as being obligations on the CS facility licensee, as operator of the securities settlement facility.

Objectives of the SSF Standards

The objectives of the SSF Standards are to ensure that CS facility licensees identify and properly control risks associated with the operation of the securities settlement facility and conduct their affairs in accordance with the SSF Standards in order to promote overall stability of the Australian financial system. Primary responsibility for the design and operation of a securities settlement facility in accordance with the SSF Standards lies with a CS facility licensee's board and senior management.

How a Licensee Meets the SSF Standards

Each SSF Standard comprises a list of requirements that, through the operation of section 821A of the Act, are binding on, and must be met by, a CS facility licensee that operates a securities settlement facility. To comply with an SSF Standard a CS facility licensee must comply with the headline standard and each of the numbered ‘sub’-standards listed under the headline standard. The SSF Standards are to be interpreted in accordance with their respective objectives and by looking beyond form to substance. In interpreting the SSF Standards, the word ‘should’ is to be treated as indicating a requirement upon the securities settlement facility to take the relevant action, unless otherwise agreed by the Reserve Bank. The Reserve Bank may, from time to time, issue guidance containing further information on specific aspects of the SSF Standards.

Where the requirements in the SSF Standards and those of the Act and Corporations Regulations 2001 are inconsistent, the requirements of the Act and Corporations Regulations will prevail to the extent of such inconsistency.

Note: The SSF Standards are based largely on the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) Principles for Financial Market Infrastructures (FMIs) (the Principles) and associated key considerations.[1] The Reserve Bank has, in parts, added to and amended the text of the Principles and associated key considerations.[2]

Footnotes

CPSS-IOSCO (2012), Principles for Financial Market Infrastructures, CPSS Publications No 101, Bank for International Settlements, April, is available at <http://www.bis.org/publ/cpss101.htm>. [1]

A marked-up version of the SSF Standards, indicating where additions and alterations have been made to the text of the Principles, will be made available at <https://www.rba.gov.au/payments-and-infrastructure/financial-market-infrastructure/clearing-and-settlement-facilities/standards/201212-new-fss-ris/> by end 2012. [2]