Systemically important financial market utilities (SIFMUs) are entities whose failure or disruption could threaten the stability of the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
financial system
A financial system is a system that allows the exchange of funds between financial market participants such as lenders, investors, and borrowers. Financial systems operate at national and global levels. Financial institutions consist of complex, c ...
. To date eight entities in the U.S. have been officially designated SIFMUs.
Legislative background
Section 804 of the
Dodd–Frank Wall Street Reform and Consumer Protection Act
The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recessi ...
(DFA) provides the
Financial Stability Oversight Council (FSOC) the authority to designate a financial market utility (FMU) that it determines is or is likely to become systemically important because the failure of or a disruption to the functioning of the 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 United States financial system.
Implications
SIFMU status places an entity under enhanced regulatory oversight by the three agencies charged with regulating SIFMUs—the
Federal Reserve Board
The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mon ...
,
Securities and Exchange Commission
The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
(SEC), and the
Commodity Futures Trading Commission
The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options.
The Commodity Exchange Ac ...
(CFTC).
On October 28, 2014, the
Federal Reserve Board
The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mon ...
finalized its revisions to the SIFMU
risk management standards. The final rule expands the implications for SIFMUs and includes:
* Heightened standards for
boards of directors
A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...
;
* Comprehensive risk management framework expectations;
* Expanded recovery and resolution plan requirements;
* Rules and procedures requirements for liquidity shortfalls;
* Broader risk management requirements; and
* Enhanced disclosure requirements for financial market infrastructures.
List of SIFMUs
As of January 2015, the
Financial Stability Oversight Council has designated eight companies as SIFMUs. The first two are regulated by the Federal Reserve Board, the next two by the CFTC, and the remaining four by the SEC; the last three are all subsidiaries of the
Depository Trust & Clearing Corporation (DTCC), a U.S.
post-trade financial services
Financial services are the Service (economics), economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, acco ...
company providing
clearing and
settlement
Settlement may refer to:
*Human settlement, a community where people live
*Settlement (structural), the distortion or disruption of parts of a building
*Closing (real estate), the final step in executing a real estate transaction
*Settlement (fina ...
services.
#
The Clearing House Payments Company
The Clearing House Payments Company L.L.C. (PayCo) is a U.S.-based limited liability company formed by Clearing House Association. PayCo is a private sector, payment system infrastructure that operates an electronic check clearing and settlement sy ...
– "on the basis of its role as operator of the
Clearing House Interbank Payments System" (CHIPS)
#
CLS Bank International – world's largest multicurrency cash settlement system
#
Chicago Mercantile Exchange
The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an a ...
– subsidiary of the
CME Group
CME Group Inc. (Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, The Commodity Exchange) is an American global markets company. It is the world's largest financial derivatives exchange, and trades in asset class ...
, the world's largest
futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or f ...
#
ICE Clear Credit
ICE Clear Credit LLC, a Delaware limited liability company, is a Derivatives Clearing Organisation (DCO) previously known as ICE Trust US LLC which was launched in March 2009.
ICE offers trade execution and processing for the credit derivatives m ...
– subsidiary of
IntercontinentalExchange
Intercontinental Exchange, Inc. (ICE) is an American company formed in 2000 that operates global financial exchanges and clearing houses and provides mortgage technology, data and listing services. Listed on the Fortune 500, S&P 500, and Russell ...
(ICE), the second largest futures exchange after CME
#
Options Clearing Corporation
# Depository Trust Company – subsidiary of
Depository Trust & Clearing Corporation (DTCC)
# Fixed Income Clearing Corporation – DTCC subsidiary
# National Securities Clearing Corporation - DTCC subsidiary
See also
*
Dodd–Frank Wall Street Reform and Consumer Protection Act
The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Recessi ...
*
Financial Stability Oversight Council (FSOC)
*
Systemic risk
*
Systemically important financial institution
A systemically important financial institution (SIFI) is a bank, insurance company, or other financial institution whose failure might trigger a financial crisis. They are colloquially referred to as "too big to fail".
As the financial crisis o ...
(SIFI)
*
Systemically Important Payment Systems Systemically important payment systems (SIPS) are payment systems which have the characteristic that a failure of these systems could potentially endanger the operation of the whole economy. In general, these are the major payment clearing systems ...
References
{{Reflist
Systemic risk
Financial regulation in the United States