Securities settlement systems and central counterparties

Securities settlement systems (SSSs) and central counterparties (CCPs) are key components of the financial system.

A financial, legal or operational problem in any of the institutions that perform critical functions in the clearing and settlement process can be a source of systemic disturbance for the financial system as a whole.

Accordingly, the Eurosystem has an interest in the safety and efficiency of these systems, as disturbances in the transfer of securities or derivatives may spill over into disruptions to payment systems that are used by SSSs or CCPs.

The oversight of SSSs and CCPs is governed by the CPSS-IOSCO Principles for financial market infrastructures (PFMIs).

For central securities depositories and SSSs, the PFMIs are being implemented by the Central Securities Depository Regulation (CSDR) and (future) related regulatory technical standards.

For CCPs, the PFMIs are implemented by the European Market Infrastructure Regulation (EMIR) and related regulatory technical standards.

Oversight responsibilities

In most euro area countries, national central banks oversee the clearing and settlement systems under national law competencies.

In addition, the Eurosystem acts as central bank of issue for securities and derivatives clearing and settlement systems via EU and international cooperative oversight arrangements established under the PFMIs, EMIR and the CSDR.

In this regard, the Eurosystem participates in the colleges established under EMIR for authorising and supervising all EU CCPs, and is consulted by the European Securities and Markets Authority (ESMA) concerning the recognition of third-country CCPs. It will also be involved in the future authorisation of CSDs under the CSDR.

Cooperation with other authorities

The Eurosystem works with other authorities through regulatory cooperation and cooperative oversight, and has specific arrangements for each activity in order to address cross-border and cross-sectoral risks related to financial market infrastructures (FMIs).

Regulatory cooperation entails working with central banks and regulators responsible for FMIs.

The main objective is to ensure that requirements for FMIs reflect the concerns of all relevant authorities, promote consistent approaches in the implementation of these requirements and safeguard a level playing field for the provision of FMI services in the EU or globally.

Cooperative oversight supports this regulatory cooperation through the ongoing monitoring and assessment of FMIs in order to pre-empt potential inconsistencies in how rules or standards are applied.

The international requirements for cooperative oversight are set out under “Responsibility E: Cooperation with other authorities” of the PFMIs.