The Financial Market Infrastructures Bill was introduced to Parliament on 17 December 2019. A copy of the Bill is available here.
The Bill will introduce a regulatory regime for Financial Market Infrastructures (FMIs). FMIs are multilateral systems that provide trading, clearing, settlement or reporting services in relation to financial services and products. The Bill will replace Parts 5B and 5C of the Reserve Bank of New Zealand Act 1989 (RBNZ Act).
The Reserve Bank of New Zealand and Financial Markets Authority will be joint regulators, except where an FMI is designated as a pure payment system, in which case the Reserve Bank will be the sole regulator.
The Bill distinguishes between designated and non-designated FMIs. An FMI will be a designated FMI if its operator opts-in to being subject to the Bill or if the regulator determines that it is systemically important. All other FMIs will be non-designated FMIs. Designated FMIs get the benefit of settlement finality and netting protections, which will be largely carried over from the current regime in the RBNZ Act.
For all FMIs, the regulators can require information, reviews, and independent reports from operators of FMIs.
For designated FMIs, the regulators have greater investigative and enforcement powers, and can issue standards which designated FMIs must comply with. Operators of designated FMIs will be required to publish rules for its participants, and get approval for any rule change. They must also develop contingency plans for how they will deal with operational or financial failure.
For designated FMIs that are systemically important, regulators will have crisis management powers. These include giving a direction to the operator of the FMI, removing a director of the operator, and making the operator subject to statutory management.
Following the summer break, Parliament resumes sitting on 11 February 2020. Although it depends on how quickly the Bill receives its First Reading and is referred to Select Committee, it can be expected that submissions to Select Committee will be due by the end of March 2020.
If you have any questions on the Bill and how it might affect your organisation, please reach out to one of our experts below. We wish you a wonderful holiday break and a prosperous new year.