The U.S. financial system processes millions of transactions each
day representing daily transfers of trillions of dollars,
securities, and other assets to facilitate purchases and payments.
Concerns had been raised, even prior to the recent financial
crisis, about the vulnerability of the U.S. financial system to
infrastructure failure. These concerns about the "plumbing" of the
financial system were heightened following the market disruptions
of the recent crisis. The financial market infrastructure consists
of the various systems, networks, and technological processes that
are necessary for conducting and completing financial transactions.
Title VIII of the Dodd-Frank Act, P.L. 111-203, the Payment,
Clearing, and Settlement Supervision Act of 2010, introduces the
term "financial market utility" (FMU or utility) for those
multilateral systems that transfer, clear, or settle payments,
securities, or other financial transactions among financial
institutions (FI) or between an FMU and a financial institution.
Utilities and FIs transfer funds and settle accounts with other
financial institutions to facilitate normal day-to-day transactions
occurring in the U.S. economy. Those transfers include payroll and
mortgage payments, foreign currency exchanges, purchases of U.S.
treasury bonds and corporate securities, and derivatives trades.
Further, financial institutions engage in commercial paper and
securities repurchase agreements (repo) markets that contribute to
liquidity in the U.S. economy. In the United States, some of the
key payment, clearing, and settlement (PCS) systems are operated by
the Federal Reserve, and other systems are operated by private
sector organizations. With Title VIII of the Dodd-Frank Act, which
was enacted on July 21, 2010, Congress added a new regulatory
framework for the FMUs and PCS activities (of FIs) designated by
the Financial Stability Oversight Council as systemically
important. On July 18, 2012, the Council voted unanimously to
designate eight FMUs as systemically important. Title VIII expands
the Federal Reserve's role, in coordination with those of other
prudential regulators, in the supervision, examination, and rule
enforcement with respect to those FMUs and PCS activities of
financial institutions. Additionally, FMUs may borrow from the
discount window of the Federal Reserve in certain unusual and
exigent circumstances. Although Title VIII primarily affects the
scope of regulatory powers, certain provisions directly affect a
utility's business operations. For example, Title VIII allows FMUs
to maintain accounts at a Federal Reserve Bank and provides access
to the Fed's discount window in unusual and exigent circumstances.
Related to PCS, Title VII of the Dodd-Frank Act imposes
requirements that will significantly affect the business of
clearinghouses in the over-the-counter (OTC) derivatives (swaps)
market. By requiring clearing of certain swap transactions through
central counterparties (CCPs or clearinghouses), Title VII is
expected to increase the volume of transactions processed by
clearing systems subject to Title VIII. Critics contend that Title
VIII grants too much discretionary authority to the Fed in an area
that they argue was not a source of systemic risk during the recent
financial crisis. S. 3497 seeks to repeal Title VIII of the
Dodd-Frank Act, stripping FSOC of its authority to designate FMUs
as systemically important. This report outlines the changes to the
supervision of key market infrastructure that are embodied in the
Dodd-Frank Act. It is intended to be used as a reference for those
interested in the financial system's "plumbing," and how the
associated systems are currently overseen and regulated.
General
Imprint: |
Createspace Independent Publishing Platform
|
Country of origin: |
United States |
Release date: |
October 2012 |
First published: |
October 2012 |
Authors: |
Marc Labonte
|
Dimensions: |
280 x 216 x 2mm (L x W x T) |
Format: |
Paperback - Trade
|
Pages: |
40 |
ISBN-13: |
978-1-4801-5288-5 |
Categories: |
Books >
Business & Economics >
Economics >
Macroeconomics >
General
|
LSN: |
1-4801-5288-9 |
Barcode: |
9781480152885 |
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