Regulatory Alerts2023-07-31
FMI Standard 10: Physical Deliveries
The Reserve Bank of New Zealand and the Financial Markets Authority jointly issued FMI Standard 10 to regulate designated financial market infrastructures regarding physical deliveries. The standard requires operators of securities settlement systems, central securities depositories, and central counterparties to clearly state their obligations under FMI rules concerning the delivery of physical instruments or commodities. Furthermore, operators must actively identify, monitor, and manage the risks associated with these physical delivery processes for settlement.
FMI STANDARD 10: PHYSICAL DELIVERIES FS10
Ref #20368233 v1.0 DOCUMENT VERSION HISTORY 1 March 2024 First issue date INTRODUCTION Application i. This standard applies to every operator of a designated FMI that was specified in its designation notice under section 29(2)(f) of the Financial Market Infrastructures Act 2021 (the Act) as falling within one or more of the following classes of designated FMIs: (a) a securities settlement system; or (b) a central securities depository; or (c) a central counterparty. Legal powers ii. Under section 8 of the Act the regulator is defined as the RBNZ and the FMA acting jointly. iii. Section 12 of the Act provides the regulator's functions. These include regulating designated FMIs, dealing with designated FMIs that are distressed, and other functions under the Act. iv. Subject to certain statutory prerequisites, section 31 of the Act empowers the regulator to make standards for designated FMIs. v. Section 34 sets out the matters that standards may deal with or otherwise relate to. Section 34(1)(e)(i), (ii) and (v) provides that the regulator may make standards that deal with, or otherwise relate to, general business risk, operational risk and custody risk. Interpretation vi. Words and phrases used in this standard have the same meaning as in the Act. Commencement vii. This standard comes into force on 1 March 2024.
Ref #20368233 v1.0 REQUIREMENTS
- An operator must clearly state its, and the FMI’s, obligations under the FMI’s rules, policies, and procedures with respect to the delivery of physical instruments or commodities for settlement.
- An operator must identify, monitor, and manage the risks associated with the delivery of physical instruments or commodities for settlement. (See Guidance for Standard 10: ‘Physical Deliveries’, in Guidance for the FMI Standards for more detail).