Oversight of Key Financial Market Infrastructures
The economy generally--and financial markets specifically--depend on a wide array of pre-trade, trade, and post-trade infrastructures to conduct and discharge financial transactions.
Post-trade arrangements for the calculation, reconciliation, transmission, confirmation, and settlement of financial market transactions play a critical role in the U.S. and global financial system. These arrangements include payment systems, clearinghouses, securities depositories, and central counterparties among others. Such arrangements often give rise to risks and interdependencies among financial institutions both within and across national borders, creating the potential for widespread financial disruptions if an arrangement fails to perform as expected. Central banks, with their mandates for macro-economic stability, are particularly interested in the smooth functioning of these arrangements and their strong and robust oversight.
The Federal Reserve is the prudential supervisor for a number of important payment, clearing, and settlement arrangements; has played a leadership role in analyzing the risks in these types of arrangements; and has advocated and contributed to the development of international risk-management standards that promote financial stability. In Part 1 of the Federal Reserve's Policy on Payment System Risk, the Board sets out its views and related principles and standards regarding the management of risks in payment and settlement systems, including those operated by the Reserve Banks.