Performance of functions relating to financial market infrastructure
As noted earlier, CCPs and CSDs provide critically important functions which underpin the safe and effective functioning of global financial markets. These critically important functions mean that disruption at, or failure of, any of these entities could threaten the financial stability of the UK or cause significant disruption to the wider UK economy and to consumers. As such, encouraging effective governance and incentivising good behaviour within these entities supports the effective functioning of UK markets, and protects consumers and the economy.
	The existing regulatory regime for CCPs and CSDs makes very limited provision for the oversight of individual conduct within these firms, as most supervisory and enforcement powers are focused on the entity itself. The Act addresses this by introducing a senior managers and certification regime (SM&CR) which can be applied to CCPs and CSDs. The key features of the SM&CR for CCPs and CSDs are similar to the existing SM&CR for banks, insurers and other authorised persons, which is set out in Part 5 of FSMA 2000.
	The Act also provides HM Treasury with a power to apply the regime to two other systemically important types of firms that promote market integrity, should the government determine that is appropriate following consultation with industry. These are Credit Rating Agencies (CRAs) and Recognised Investment Exchanges (RIEs). CRAs perform an integral role within global financial markets by providing judgments on the creditworthiness of a wide variety of financial instruments. RIEs are marketplaces where equities, commodities, derivatives and other financial instruments are traded. The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange. By providing that the regime can be applied to CRAs and RIEs, the Act aims to deliver greater regulatory consistency across the financial services sector.
	CCPs and CSDs are regulated by the Bank, whilst RIEs and CRAs are regulated by the FCA. The Bank or the FCA (as appropriate) will make rules that will apply to these entities within the SM&CR.
	The government will be able to decide when to apply the regime to any one of the entities within scope of the regime. The Act also allows the government to tailor the regime to each type of firm. For example, CRAs are subject to a stand-alone regulatory regime separate to the Part 18 of FSMA 2000 regime for CCPs, CSDs and RIEs and the regime will need to account for those differences.
	The Act provides supervisory, disciplinary and other powers for the Bank and the FCA, including the power to impose financial penalties, to take action against misconduct, and to make prohibition orders. The Act includes further provisions to ensure that the SM&CR can be introduced as intended, and the relevant regulators (Bank or FCA) can regulate and supervise these entities effectively.