The countdown begins: FMIs given one year to put fundamental rules into practice

The Bank of England has finalised its Fundamental Rules for financial market infrastructure. Having originally proposed a six-month implementation period, the Bank has now given FMIs until 18 July 2026 to prepare for these new requirements.

Recent changes to the Bank of England’s powers means that it has more rule-making powers rather than merely overseeing compliance with regulation set in legislation. The Bank is using these powers for the first time to set high level rules for the market infrastructure it supervises.

The Fundamental Rules will initially apply to UK:

• Central counterparties (CCPs)
• Central securities depositories (CSDs)
• Recognised payment system operators (RPSOs) and their specified service providers

The Bank consulted on its Fundamental Rules last year, see: Bank of England drafts fundamental rules for financial market infrastructure for more. The rules set 10 high-level outcomes for FMIs to meet. The final version of the regime is in line with the original proposals with only minor changes. For example, in its guidance the Bank:

• clarifies that any action or inaction by an FMI to manage risks it poses to the stability of the financial system is subject to preserving its own resilience,
• emphasises the role of transparency between FMIs and their participants to support a better understanding and management of the relevant risks incurred through participation, and
• clarifies how the Fundamental Rules apply to group activities, e.g. in relation to the requirement on FMIs to deal with regulators in an open and cooperative way.

Other market infrastructure may be brought into the scope of the Bank’s supervision in due course e.g. systemic payment systems using certain types of stablecoin. The Fundamental Rules would then be extended to apply to these newly regulated FMIs as well. The Bank may consider applying the regime to some overseas FMIs, such as non-UK RPSOs or systemic overseas CCPs, in the future.

The Bank has extended the implementation period for all Fundamental Rules to 12 months to 18 July 2026. Feedback to the Bank’s consultation suggests that Fundamental Rule 10 – the requirement to identify, assess and manage the risks that its operations could pose to the stability of the financial system – will trigger the most significant change to FMIs’ internal processes.