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Federal Reserve Board of Governors

Designated Financial Market Utilities

Designated Financial Market Utilities

Financial market utilities (FMUs) are multilateral systems that provide the essential infrastructure for transferring, clearing, and settling payments, securities, and other financial transactions among financial institutions or between financial institutions and the system. In cases where a failure or a disruption to the functioning of an FMU could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the U.S. financial system, the FMU may be designated as systemically important by the Financial Stability Oversight Council (Council) under Title VIII of the Dodd-Frank Act.

To date, the Council has designated the following FMUs as systemically important (Supervisory Agency indicated in parentheses):

  • The Clearing House Payments Company, L.L.C., on the basis of its role as operator of the Clearing House Interbank Payments System - (Board);
  • CLS Bank International - (Board);
  • Chicago Mercantile Exchange, Inc. - (Commodity Futures Trading Commission (CFTC));
  • The Depository Trust Company - (Securities and Exchange Commission (SEC));
  • Fixed Income Clearing Corporation - (SEC);
  • ICE Clear Credit L.L.C. - (CFTC);
  • National Securities Clearing Corporation - (SEC); and
  • The Options Clearing Corporation - (SEC).

For more information regarding the Council’s designations, see the Council’s final rule on the FMU designation process and press release on the designation of the eight FMUs.

Title VIII of the Dodd-Frank Act

Title VIII was enacted to mitigate systemic risk in the financial system and to promote financial stability, in part, through enhanced supervision of designated FMUs. Among other things, Title VIII authorizes the Board to prescribe risk-management standards for and supervise certain designated FMUs and to participate in the examinations of designated FMUs for which the Board is not the Supervisory Agency, including designated clearing entities supervised by the CFTC or the SEC.

Title VIII also requires a designated FMU to provide notice to its Supervisory Agency 60 days in advance of any changes to its rules, procedures, or operations that could, as defined by its Supervisory Agency, materially affect the nature or level of risks presented by the designated FMU. For certain emergency circumstances, Title VIII allows a designated FMU to implement a change that would otherwise require advance notice and requires the designated FMU to provide notice to its Supervisory Agency within 24 hours of implementing the emergency change. As the Supervisory Agency of certain designated FMUs, the Board will receive and review advance notices and notices of emergency change (collectively, “notices of material change”) from those designated FMUs.

In addition, other Supervisory Agencies (e.g., the CFTC and the SEC) will consult with the Board before taking any action on, or completing their review of, any notice of material change submitted by designated FMUs under their jurisdiction. Designated FMUs may not implement any change that could materially affect the nature or level or risk posed by the designated FMU, except as permitted under Title VIII and the relevant implementing regulations.

The Board adopted Regulation HH (12 C.F.R. Part 234) to implement, in part, the statutory provision of Title VIII on notices of material change. Regulation HH § 234.5 defines and describes changes that the Board considers to be material and thus subject to its review, and provides procedural requirements, such as the required content of notices and the timing of the review period (see submission instructions).

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Last update: February 21, 2014