PFMI Framework
CategoryFinancial Market Regulation
Principles for Financial Market Infrastructures (PFMI) were set out by the International Organization of Securities Commissions (IOSCO) in 2012 to harmonize and strengthen the existing international standards for entities that facilitate clearing, settlement and recording of financial transactions.
Clearing and Settlement Supervision
Risk Mitigation in Financial Market Infrastructure
PFMI sets out principles to be followed to manage risk associated with operating financial market utilities — Payment Systems (PS) that are systemically important, Central Securities Depositories (CSD), Securities Settlement Systems (SSS) and Central Counterparties (CCP). The revised principles also incorporate additional guidance for Over-the-Counter (OTC) derivatives utilities — respective CCPs and Trade Repositories (TR).
In addition to standards for Financial Market Infrastructure (FMI) entities, and in alignment with Basel Accords, the principles outline general responsibilities of central banks, market regulators and other relevant authorities for financial institutions.
While safe and efficient FMI entities contribute to maintaining and promoting financial stability and economic growth, they also can be sources of financial shocks — such as liquidity dislocations and credit losses, or a major channel through which these shocks are transmitted across domestic and international financial markets. PFMI defines guidelines for limiting FMI systemic risk, and foster transparency and financial stability.
