Financial market infrastructures (FMIs) provide channels through which payments, securities, derivatives or other financial transactions are cleared, settled or recorded. Well-functioning and efficient FMIs play a critical role in promoting financial stability and economic growth. FMIs can strengthen the markets they serve; however, if not managed properly, they can pose significant risks to the financial system and be a potential conduit or source of contagion. A stable financial system therefore depends on careful management and mitigation of the key risks for FMIs.
The standards for designated FMIs were issued on 27 July 2023 under section 31 of the Financial Market Infrastructures Act 2021 (the FMI Act) by the Reserve Bank of New Zealand and the Financial Markets Authority acting jointly as the regulator under the FMI Act. The FMI standards impose requirements on operators of designated FMIs and set out requirements applying to designated FMIs with which their operators must ensure compliance.
The FMI standards have been based on the Principles for Financial Market Infrastructures (PFMI) issued by the Committee on Payments and Market Infrastructure (CPMI) and the International Organization of Securities Commissions (IOSCO), with some modifications to reflect the New Zealand legal and operating environment and that the FMI standards are secondary legislation.
The Reserve Bank of New Zealand (RBNZ) and the Financial Markets Authority (FMA) jointly oversee designated settlement systems in New Zealand. Designation gives statutory backing for finality of settlement and netting through a designated settlement system.
The designation of the settlement systems is currently undertaken in accordance with the Reserve Bank of New Zealand Act 1989 (RBNZ Act), Part 5C which details the FMA’s and RBNZ’s oversight powers and requirements for these systems, with the FMA’s powers focusing on:
Further information on how we work with the RBNZ can be found in our memorandum of understanding (MoU).
At present, there are three designated settlement systems the FMA is jointly responsible for regulating. Information on these settlement systems, in accordance with section 156N of the RBNZ Act, can be found below.
The existing regime will soon be replaced by the enhanced regulatory regime as set out in the Financial Market Infrastructures Act 2021 (FMI Act). The FMI Act became law on 10 May 2021. While some aspects of the FMI Act are already in force, full implementation of the act will occur on 1 March 2024. Read more about the New Regime in the paragraph entitled "new regime" below.
The Financial Market Infrastructures Act 2021 (FMI Act) became law on 10 May 2021.
The FMI Act establishes enhanced regulatory regime for FMIs that brings New Zealand in line with our peer jurisdictions and reflects international best practice. Under the FMI Act the joint regulators recommend, to respective Ministers, designation of FMIs. There are two ways that an FMI can become designated. First, the joint regulators can determine that an FMI is systemically important and therefore must be designated. Second, an FMI can apply for designation status on their own accord to access certain legal protections around netting and settlement finality.
For payment systems, the Reserve Bank is the sole regulator. For all other types of FMIs, the Reserve Bank and the FMA will act jointly as the regulator.
The FMI Act then provides functions and powers of the joint regulators with 3 main components:
The Financial Market Infrastructures Act 2021 Commencement Order 2023 was made on 22 May 2023. This order brings the FMI Act fully into force on 1 March 2024.
The Financial Market Infrastructures Regulations 2023 came into force on 3 July 2023. These regulations support the implementation of the FMI Act. They:
The standards for designated FMIs were issued on 27 July 2023 and come into effect starting from 1 March 2024.
NZClear is the securities settlement system and central securities depository for a broad range of fixed interest securities and equities that are issued in New Zealand. It is owned and operated by the RBNZ. NZClear was declared a designated settlement system by the Reserve Bank of New Zealand (Designated Settlement System – NZCDC) Order 2012 on 3 September 2012.
Chief Financial Officer
Financial Services Group
Reserve Bank of New Zealand
PO Box 2498
Telephone (04) 472-2029
Email: [email protected]
New Zealand Clearing and Depository Corporation Limited (NZCDC) clears and settles all transactions that are conducted on the markets of the New Zealand stock exchange, NZX Limited (NZX). NZCDC was declared a designated settlement system by the Reserve Bank of New Zealand (Designated Settlement System – NZCDC) Order 2010 on 30 August 2010.
Chief Operating Officer and Head of Risk
New Zealand Clearing and Depository Corporation Limited
Level 2, NZX Centre
11 Cable Street
PO Box 2959
Telephone: +64 4 495 2465
Email: [email protected]
ASX Clear (Futures) Pty Limited (ASXCF) is the Clearing House for all futures and options products traded on ASX 24 and was declared a designated settlement system by the Reserve Bank of New Zealand (Designated Settlement System – ASXCF) Order 2020 on 10 August 2020.
General manager, Enterprise compliance
ASX Operations Pty Ltd
20 Bridge Street
SYDNEY, NSW 2000
Telephone: +61 2 9227 0350
Designation and Oversight of Designated Settlement Systems
This policy statement explains Part 5C of the Reserve Bank of New Zealand Act 1989 and the roles and policies of the Reserve Bank and the Financial Markets Authority in relation to the designation and oversight of designated settlement systems.