The Federal Reserve has finalized standards required by the Dodd-Frank Act governing “financial market utilities” or FMUs.  FMUs for these rules include providers of payment, clearing and settlement services (for now focused only on large-value transactions) and central counterparties (CCPs).  The final rule tracks current FRB risk standards for large-value payment providers, but sets new ones for CCPs and anticipates an array of new global FMU requirements, laying the groundwork for a significant restructuring in the regulatory and resolution framework for designated firms.  The final rule retains several of the more qualitative criteria  included in the proposal – e.g., with regard to efficient operation and fair access – despite comments objecting that these would bring the FRB inappropriately into setting FMU business strategy or other matters not related to risk.  The Board retained these criteria on grounds that they do address systemic risk, thus laying the basis also for a broader role in dictating an array of FMU activities, governance and operating matters.  However, the financial resources required for systemic payment systems remain as proposed, with the FRB rejecting still more stringent standards some commenters recommended.

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