Monica Singer has said that South Africa’s Central Securities Depository (CSD) strongly advocates the Principles for Financial Market Infrastructures (PFMIs) published by the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO), and it encourages all Financial Market Infrastructures to do the same.
Speaking at the CPSS-IOSCO panel discussion at Sibos, Singer argued that the principles-based route is the only one that works. She believes that CPSS-IOSCO cannot, realistically, prescribe things (as would be the case with ‘rules-based’ legislation). Yet it is rather ‘best practice’ considerations that help a local market identify areas to focus on in order to provide a robust Financial Market Infrastructure.
All Financial Market Infrastructures on the same level
According to Singer, the Principles have put all Financial Market Infrastructures on par with one another – from Central Counterparties to CSDs to CLS (Continuous Linked Settlement) – giving them equal weight and encouraging them to comply with the same set of Principles for the benefit of the global financial market. It is a huge advantage for the market that the playing field is levelled.
The PFMIs were issued by CPSS-IOSCO in April 2012. Jurisdictions globally are in the process of incorporating them into their regulatory frameworks to foster the safety, efficiency and resilience of their Financial Market Infrastructures. In South Africa, there is already legislation in place to support the PFMIs called the Financial Markets Act, which became operational at the beginning of June 2013.
Strate had already complied with international best practice before the Principles were drafted by CPSS-IOSCO and when these Principles were published, they affirmed that we were on the right track.
For example, we had a Participant Failure Manual that was translated into other languages for other Financial Market Infrastructures. In addition, Strate strongly believes that we all have a responsibility to work with and educate the local market and our international counterparts as we are all interdependent and have an impact on one another,” says Singer.
Adoption of CPSS-IOSCO Principles is vital
She believes that for Strate, the adoption of CPSS-IOSCO Principles is not about regulation, but rather about following best practice. “According to the CPSS-IOSCO, Financial Market Infrastructures were a ‘source of strength’ during the financial crisis, able to settle obligations when due, thereby giving market participants the confidence to continue transacting. CSDs can use their adoption of the Principles to promote confidence within their respective markets.”
She explains that if the Financial Market Infrastructure is highly rated in its PFMI Assessment, it provides a strong platform to support efforts that attract funds and investment into the country. This is essential for all markets and particularly emerging markets looking to strengthen an important contributor of economic growth.
The PFMIs provide a framework that is flexible and enabling with no right or wrong answers, which could become a valuable learning exercise for the entire industry. The assessment becomes a living document and a guiding light for CSDs and the industries they serve. Their responses will evolve and change as their organisation and environment changes.”
In 2012, Strate undertook a voluntary self-assessment of the then draft Principles and it is currently completing an official assessment against the final 24 Principles in conjunction with its regulator, the Financial Services Board. Singer highlighted that Strate is awaiting the results of its assessment.