Financial market infrastructure supervision (2024)

FAQs

What is the role of financial market infrastructure? ›

Well-designed and reliable FMIs can be a source of both financial stability and operational efficiency. FMIs act as a coordinating device, bringing a network of counterparties together to support trading liquidity and the netting of exposures and settlement obligations.

Many of us use FMIs on a daily basis, for example for salary or pension payments into our bank accounts, to take cash out of a cash machine or to pay for something online. Every day we make around 360 billion pounds worth of these types of payment through FMIs based in the UK, and regulated by the Bank of England.

The Principles for financial market infrastructures are the international standards for financial market infrastructures, ie payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories.

The Bank of England is responsible for supervising certain financial market infrastructures in the UK. FMIs are a vital part of the economy. This section refers to the Bank's functions as FMI regulator.

Examples of financial market infrastructure firms include payment systems, securities settlement systems, central securities depositories, central counterparties, and trade repositories.

Systemically important payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories are collectively known as financial market infrastructures (FMIs).

Financial Management Information Systems (FMIS) support the automation and integration of public financial management processes including budget formulation, execution (e.g. commitment control, cash/debt management, treasury operations), accounting, and reporting.

Summary: A well-functioning financial management information system (FMIS) provides timely, reliable, and comprehensive reports that support implementation of the government's fiscal policies and fiscal rules, and the formulating, controlling, monitoring, and executing of the budget.

MIS can help you integrate and analyze data from various sources, such as accounting, sales, inventory, payroll, and customer relationship management (CRM). This can help you gain a comprehensive and accurate view of your financial situation, identify trends and patterns, and support decision-making.

What is risk at an FMIs? FMI risk is different from bilateral credit exposure and is typically a lower risk. This said, due to the existence of a default fund, liquidity funds and loss-sharing arrangements, counterparties can incur credit-like losses, even in the absence of the default of the counterparty itself.

What are the risks of market infrastructure? ›

market infrastructure risk

The main financial market infrastructure risks are legal, liquidity, credit, business, custody, investment and operational risk.

1.1 Financial Market Infrastructure (FMI) is defined as a multilateral system among participating institutions, including the operator of the system, used for the purposes of clearing, settling, or recording payments, securities, derivatives, or other financial transactions.

SWIFT has become a crucial part of the global financial infrastructure. More than 11,000 global SWIFT member institutions sent an average of 44.8 million messages daily through the network in November 2022.

FMIs are more likely to be systemically important if they play a significant role in the operation of the markets they serve and if those markets are significant to the stability of the financial system and proper functioning of the economy.

By acting as intermediaries, FMIs ensure the completion and finality of transactions, reducing the risk of default and enhancing market stability.

The financial infrastructure is the core in the financial system and is a precondition of its functioning. The financial infrastructure is made up of technical systems through which payments are made and transactions with financial instruments are handled.

What are Market Infrastructure Institutions (MIIs)? Stock exchanges, Clearing Corporations and Depositories together constitute MIIs. Stock exchange- Stock exchange is an institution which assists, regulates or controls the business of buying, selling or dealing in securities.

Financial markets facilitate the interaction between those who need capital with those who have capital to invest. In addition to making it possible to raise capital, financial markets allow participants to transfer risk (generally through derivatives) and promote commerce.

A good Marketing Infrastructure enables leads to come into the business, collect important data, effectively guides prospects through the marketing funnel and allows you to nurture them before converting them into customers.