The securities clearing and settlement system operated by the CCP and the securities delivery and settlement system operated by the CSD constitute critical infrastructures in ensuring the proper functioning of Switzerland’s securities markets. Their stability and availability, not least in times of crisis, are essential in preserving investor confidence in the assets in question.
The CCP acts as an intermediary in on-exchange and in some over-the-counter (OTC) markets. It acts as the seller and buyer in a transaction, thus assuming the function of a performance guarantor. In order to be able to ensure proper settlement and performance of transactions for the buyer and seller in case one of the two parties fails to meet its duty of delivery or payment, the CCP demands collateral from all trading parties in the form of cash and securities.
Exchange-traded securities are either deposited physically with an authorised CSD or registered in the depository as book-entry securities. The first task of the central depository is to settle securities transactions. In other words, it transfers ownership of the securities, generally on the basis of delivery versus payment (DvP).
The central depository also ensures that all securities are held correctly in safe keeping and acts as a registry for book-entry securities. This role includes making sure that the number of securities held by the depository matches the number of securities credited to its clients’ custody accounts.
Moreover, the CSD must ensure that corporate actions, such as interest or dividend payments, and capital increases can be performed centrally for the securities deposited with it.
The supervision conducted by FINMA focuses on the supervised FMIs' organisation and its management of market, credit, liquidity and operational risks. In the case of CCPs, collateral management is therefore of particular importance. For CSDs, this centres on monitoring risks connected to securities settlement and custody.
In order to protect the stability of the financial system, the SNB also monitors the CCP, payment and securities settlement systems of systemic importance for the Swiss financial centre in line with Article 19 of the National Bank Act (NBA). As part of its monitoring remit, the SNB defines specific requirements for these financial market infrastructures and reviews compliance with them. FINMA and the SNB work together in supervising the CCP and CSD.