Financial market infrastructure supervision

• Bacs (recognised 5 January 2010)
• CLS (recognised 5 January 2010)
• CREST (recognised 5 January 2010)
• LCH Ltd (recognised 5 January 2010)
• Faster Payments Service (recognised 24 February 2010)
• ICE Clear Europe (recognised 24 February 2010)
• Visa Europe (recognised 19 March 2015)
• LINK (recognised 23 May 2016)

VocaLink as of 25 April 2018, has been specified as a service provider in the recognition orders of Bacs, Faster Payments Services and LINK.

CHAPS as of 13 November 2017 is supervised on a non-statutory basis.

The Bank recognises the following CCPs: 

LCH Limited

• Initial authorisation: 12 June 2014 (previously recognised as a clearing housing since 22 November 2001)
• Latest variation: 21 July 2016
• Address: Aldgate House, 33 Aldgate High Street, London EC3N 1EA
• LCH authorised services and activities
• Classes of over-the-counter derivatives that LCH Limited has been authorised to clear

LME Clear Limited

• Initial authorisation: 3 September 2014
• Address: 10 Finsbury Square, London EC2A 1AJ
• LME Clear authorised services and activities 
• Classes of over-the-counter derivatives that LME Clear has been authorised to clear
• LME Clear submitted an application to the Bank of England in accordance with Article 54(2) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending regulation (EU) No 648/2012 (MiFIR) for permission to avail itself of transitional arrangements. The Bank of England, having taken into account the relevant risks resulting from the application of the access rights under Article 35 as regards exchange-traded derivatives to the orderly functioning of the CCP, has decided that Article 35 will not apply to LME Clear in respect of exchange-traded derivatives, for a transitional period until 3 July 2020.  This decision will be subject to, and effective on and from, MiFIR coming into application on 3 January 2018.

Interim list of third-country CCPs that intend to offer clearing services and activities in the UK under the Temporary Recognition Regime (TRR) of the Central Counterparties (Amendments, etc., and Transitional Provision) (EU Exit) Regulations 2018.

The Bank recognises the following clearing houses which are not CCPs: 

Euroclear UK and Ireland Limited

• Effective date: 23 November 2001
• Address: 33 Cannon Street, London EC4M 5SB

Interim list of third-country CSDs that intend to provide CSD services in the UK using the transitional provisions of the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018.

CME Clearing Europe Limited

• Initial authorisation - 4 August, 2014
• De-authorisation - 12 October 2017
• Website - www.cmegroup.com/europe/clearing-europe

The Bank recognises the following systems designated under the Settlement Finality Regulations: 

• Bacs (operated by Pay.UK Limited)
• CHAPS (operated by Bank of England)
• Continuous Linked Settlement (operated by CLS Bank International)
• Euroclear UK and Ireland
• Faster Payments Service (FPS) (operated by Pay.UK Limited)
• ICE Clear Europe
• Image Clearing System (ICS) (operated by Pay.UK Limited)
• LCH Limited
• LME Clear Limited
• SIX x-clear

Interim list of EEA systems whose operators have notified their intention for such systems to receive settlement finality protection in the UK pursuant to the Temporary Designation Regime (TDR) of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019.

The Bank recognises the following operators under the Uncertified Securities Regulations:

• Euroclear UK & Ireland

List of central banks notified to HM Treasury as receiving settlement finality protection for securities held as collateral security pursuant to The Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019.

Operators of central securities depositories must meet the requirements of the Uncertificated Securities Regulations 2001 (USRs) in order to operate a system supporting the electronic transfer of titles to UK securities.

The Bank of England has a set of rules for operators of central securities depositories. 

Central securities depositories may also be regulated under the Financial Services and Markets Act (FSMA) as a recognised clearing house. In this case they will need to adhere to the recognition requirement regulations in Part 18 of the Act. 

Central securities depositories may also be regulated under the Banking Act 2009 if the payment arrangements supporting it constitute a recognised payment system.

Recognised clearing houses are regulated under Part 18 of the Financial Services and Markets Act and are subject to the recognition requirement regulations in the Act.

Recognised clearing houses that are central counterparties (CCPs) must comply with the European Market Infrastructure Regulation (EMIR) as well as the rules for recognised central counterparties set by the Bank of England.

Implementation by the Bank of England of ESMA's guidelines and recommendations on CCP interoperability arrangements

• Consultation Paper
• Summary of feedback received and policy response

Financial penalties imposed by the Bank under the Financial Services and Markets Act 2000 or under Part 5 of the Banking Act 2009

• Policy Statement

The giving of directions to qualifying parent undertakings of UK recognised clearing houses

• Policy Statement

UK withdrawal from the EU: Changes to FMI rules and onshored Binding Technical Standards 

• Consultation - October 2018
• Policy Statement - February 2019 (updated April 2019)

Statutory statements of procedure in respect of the Bank of England’s supervision of financial market infrastructures

• Policy Statement

Financial resources requirements for Recognised Bodies

Financial Services Authority - PS12/13

The Settlement Finality Regulations allow payment and settlement systems to apply for certain protections against normal insolvency law in respect of transfers through their systems. To receive these protections, systems must meet the criteria set out in the regulations and be designated by the relevant authority. 

Payment systems need to contact HM Treasury to discuss recognition, although the process can also be initiated by the Treasury. They will then be supervised by the Bank of England.

The Treasury has published a guidance note on the recognition process.

There is no standard application form for recognition as a recognised clearing house that is not a central counterparty (CCP). Section 288 of the Financial Services and Markets Act specifies some details of what must accompany an application. Prospective applicants should contact the Bank of England at an early stage for advice.

There is no standard application form for overseas CCPs seeking a recognition order under 170B of the Companies Act 1989. Prospective applicants should contact us at an early stage for advice.

Firms wishing to become a recognised overseas clearing house should contact us at an early stage for advice. Firms can no longer apply for recognised overseas clearing house status if they are a CCP.

There is no standard application form to apply to become an operator of a central securities depository under the Uncertificated Securities Regulations. Please contact us directly instead. Prospective applicants may wish to contact us at an early stage for advice on the practical aspects of an application. 

Payment and settlement systems can apply for certain protections against normal insolvency law under the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (as amended), which implement the EU Settlement Finality Directive in the UK. This guarantees that financial instruments and payments which enter into such systems are finally settled, even if the sender has become insolvent or transfer orders have been revoked.

To receive these protections, systems must meet the criteria set out in the Settlement Finality Regulations and be designated by the relevant authority, which is the Bank of England for all entities other than recognised investment exchanges.

There is no standard application form to apply for designation – please contact us directly instead.

There are different application processes for different types of FMI. To contact us, please email FMIInformation@bankofengland.co.uk.

Under Article 54(2) of the Markets in Financial Instruments Regulation (MiFIR), a central counterparty (CCP) supervised by the Bank of England may apply to us for permission to make use of transitional arrangements so that Article 35 MiFIR regarding non-discriminatory access to a CCP would not apply to the applicant in respect of exchange-traded derivatives, for a transitional period until 3 July 2020. A CCP minded to submit such an application to us should consider the following factors: 

Timing of applications

Such applications may be submitted to us only if the European Commission has (as mandated by MiFIR Article 52(12)) submitted its report assessing the need to temporarily exclude exchange-traded derivatives from the scope of Article 35 and 36, and that report assesses that there is not a need to exclude exchange-traded derivatives.

Applications must be submitted before MiFIR comes into application on 3 January 2018. A prospective applicant may wish to contact us at an early stage to discuss the preparation, scheduling and practical aspects of an application.

Format of applications

You must apply to us in writing by emailing FMIInformation@bankofengland.co.uk. Applicants are advised to contact us at the same email address to discuss any arrangements required to transmit confidential information before such information is transmitted to us.
 
Content of applications

There is no prescribed template for this type of application by a CCP, but we expect any application of this type to contain sufficient and detailed evidence on at least the following:

• A description of the exchange-traded derivatives clearing services provided by the CCP, including which trading venues are cleared for, details of the products cleared, average cleared volumes over an indicative period, current levels of open interest and delivery processes.
• A description of the risk (or risks) that the access rights under Article 35 as regards exchange-traded derivatives would present to the orderly functioning of the CCP. This should include details of how each risk is specific to the CCP, the CCP’s assessment of the probability of the risk crystallising and its assessment of the impact of such crystallisation on the CCP’s ability to continue to operate in compliance with its regulatory requirements and within its existing risk appetite.
• A discussion of the possible mitigation arrangements available to the CCP to address each risk identified above. This should identify potential arrangements the CCP or the trading venue could implement to mitigate the risk, and the CCP’s rationale for contending that implementation of such mitigation arrangements would either not be effective or would not be proportionate.
• We may require applicants to provide further detail or clarification. We will discuss this with the applicant if required.

Anyone proposing to dispose, directly or indirectly, of a qualifying holding in a UK CCP is required to notify the Bank of England in writing before making the disposal. They are also required to notify us of a decision to reduce a qualifying holding so that the proportion of the voting rights or of the capital held would fall below 10%, 20%, 30% or 50%, or so that the CCP would cease to be their subsidiary.

You must send these details by email to FMIInformation@bankofengland.co.uk.

The email should include:

1. Details of the current and proposed shareholding in the CCP.
2. Who the shares are being sold to.
3. The date the sale is expected to take effect.

Anyone who wishes to acquire or increase, directly or indirectly, their qualifying holding in a UK CCP or to further increase such a qualifying holding with the result that their voting rights or capital held reaches or exceeds 10%, 20%, 30% or 50%, or so that the CCP would become their subsidiary, must first contact the Bank of England for approval.

If the proposed acquirer is not a body corporate, please contact us by email at FMIInformation@bankofengland.co.uk to discuss the form of the notification.

We have a pre-notification stage which is designed to help those proposing to acquire or increase a qualifying holding in a CCP to understand the process and to submit a complete application.

We recommend that you contact us at FMIInformation@bankofengland.co.uk to discuss whether a pre-notification meeting is necessary. You can submit a notification without contacting us first, but this increases the likelihood of your application being incomplete.

To notify us, email a copy of the acquisition notification form and your supporting documents to FMIInformation@bankofengland.co.uk and send two hard copies to:

The Director, Financial Market Infrastructure Directorate, Bank of England, 20 Moorgate, London EC2R 6DA.