Supervision of central counterparties, central securities depositories and securities settlement systems

Central counterparties (CCPs), central securities depositories (CSDs) and payment systems clear and settle securities transactions. Both FINMA and the Swiss National Bank (SNB) supervise these systems and their operators.

The securities clearing 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.

Clearing through CCPs

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.

Settlement through CSDs and securities settlement systems

Exchange-traded securities are either deposited physically or registered as book-entry securities with an authorised CSD. The first task of the CSD is to settle securities transactions.

The CSD also ensures that all securities are held correctly in safe keeping and acts as a registry for book-entry securities.

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.

FINMA and the SNB monitor the CCP and securities settlement systems

The supervision conducted by FINMA focuses on the supervised financial market infrastructures' organisation and its management of market, credit, liquidity and operational risks.

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.