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Can you summarize 12 CFR Part 234?
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM > DESIGNATED FINANCIAL MARKET UTILITIES (REGULATION HH)
Short Summary
This part of the Code of Federal Regulations, issued by the Board of Governors of the Federal Reserve System, establishes risk-management standards for designated financial market utilities involved in payment, clearing, and settlement activities. The risk-management standards apply to designated financial market utilities, excluding derivatives clearing organizations registered under the Commodity Exchange Act or clearing agencies registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. The document sets out requirements and procedures for designated financial market utilities proposing changes that could materially affect risks. It also provides standards, restrictions, and guidelines for Federal Reserve Banks in establishing and maintaining accounts for designated financial market utilities, as well as terms for paying interest on balances held at the Reserve Bank. The regulation defines various terms used in the context of financial market utilities and covers aspects such as legal basis, governance, risk management framework, credit risk, collateral, margin, liquidity risk, settlement finality, money settlements, physical deliveries, central securities depositories, exchange-of-value settlement systems, participant-default rules and procedures, segregation and portability, general business risk, custody and investment risks, operational risk, access and participation requirements, tiered participation arrangements, links with other financial market utilities, efficiency and effectiveness, communication procedures and standards, and disclosure of rules, key procedures, and market data. The document emphasizes the need for clear, transparent, and well-documented governance arrangements, risk-management policies and procedures, and robust operational frameworks. It also highlights the importance of maintaining sufficient financial resources, managing credit and liquidity risks, and ensuring the integrity and efficiency of payment, clearing, and settlement processes. The document does not specify penalties for non-compliance or violations.
Whom does it apply to?
Designated financial market utilities involved in payment, clearing, and settlement activities, excluding derivatives clearing organizations registered under the Commodity Exchange Act or clearing agencies registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934
What does it govern?
Risk-management standards for designated financial market utilities involved in payment, clearing, and settlement activities
What are exemptions?
The risk-management standards do not apply to designated financial market utilities that are derivatives clearing organizations registered under the Commodity Exchange Act or clearing agencies registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Routine technology upgrades, fee changes, administrative changes, and non-substantive revisions are exempted from the advance notice requirements.
What are the Penalties?
No specific penalties for non-compliance or violations are mentioned.
Jurisdiction
U.S. Federal Government