Regulation HH Financial Market Utilities USA

Regulation HH (Financial Market Utilities) is a federal regulation that applies to certain financial market utilities (FMUs) designated by the Financial Stability Oversight Council (FSOC) as systemically important and that is aimed to ensure that such FMUs have robust risk management and operational capabilities.

FMUs are entities that perform key financial market infrastructure functions, such as clearing, settling, or processing financial transactions. Examples of FMUs include clearinghouses and payment systems.

Regulation HH is intended to enhance the safety and soundness of FMUs and to reduce the risk that a failure or disruption at an FMU could threaten the stability of the U.S. financial system. The regulation sets out requirements for risk management, operational capabilities, and recovery and wind-down planning for FMUs.

The scope of Regulation HH (Financial Market Utilities) applies to financial market utilities (FMUs) that have been designated by the Financial Stability Oversight Council (FSOC) as systemically important. These FMUs perform key financial market infrastructure functions, such as clearing, settling, or processing financial transactions. Examples of FMUs include clearinghouses and payment systems.

The regulation applies to a range of activities that FMUs may engage in, such as clearing, settling, and processing transactions for a wide variety of financial products, such as derivatives, securities, and foreign exchange.

The regulation applies to both the FMU’s risk management and operations, it set out requirements for risk management, operational capabilities, and recovery and wind-down planning to ensure that FMUs have robust risk management and operational capabilities. The regulation also applies to the FMU’s supervision and oversight, and it requires FMUs to be subject to regular examination and supervision by the FSOC, the Federal Reserve, and other relevant regulatory agencies.

The purpose of the regulation is to ensure that FMUs have robust risk management and operational capabilities and reduces the risk that a failure or disruption at an FMU could threaten the stability of the U.S. financial system. It also helps to protect the interests of the FMUs’ customers and the public by ensuring that the FMUs are supervised and that information about them is available to the public.

Some of the key provisions of Regulation HH include:

• Risk management: FMUs must establish and maintain risk management frameworks that are appropriate for the nature, scale, and complexity of their activities.
• Operational capabilities: FMUs must have robust operational capabilities that ensure the continuity and resilience of their services in the event of a disruption.
• Recovery and wind-down planning: FMUs must develop and maintain recovery and wind-down plans that can be implemented in the event of a material financial stress or default of a clearing member.
• Supervision and oversight: FMUs must be subject to regular examination and supervision by the FSOC, the Federal Reserve, and other relevant regulatory agencies.
• Transparency and disclosure: FMUs must disclose certain information to the public, such as details about their risk management practices and any defaults or disruptions that occur.

The regulation is important for financial market utilities as it ensures that they have robust risk management and operational capabilities and reduces the risk that a failure or disruption at an FMU could threaten the stability of the U.S. financial system. It also helps to protect the interests of the FMUs’ customers and the public by ensuring that the FMUs are supervised and that information about them is available to the public.