will need to address how potential uncovered liquidity shortfalls or credit losses would be allocated, and how the fmi would replenish any financial resources it uses in a stress event so that it can continue to operate in a safe and sound manner. the principles also introduce a number of new requirements. some of these address shortcomings that were observed during the crisis. for example, the principles require ccps to have segregation and portability arrangements that protect customer positions and collateral. an fmi will also be required to manage the risks it bears from and poses to, not only its participants and their customers, but also to other entities with which it does business such as linked fmis, settlement banks, custody banks, and liquidity providers. furthermore, the principles will require fmis to establish a dedicated financial cushion that could absorb unanticipated general business losses. this is to ensure that an fmi can continue to provide its critical services. the principles also require that fmis have plans for their recapitalization or orderly wind down, if that were to prove to be necessary. finally, the coverage of the international standards has been expanded to trade repositories as a new category of fmi, to further complement the g - 20 otc derivatives initiative for mandatory trade reporting. the principles that address trade repositories focus on their transparency and the disclosure of market data. this reflects the important and unique role they will play in disseminating information both to regulators and to the market more broadly. the second major goal is to promote consistent global enforcement of the standards. toward this end, the principles unify and harmonize three existing sets of standards – core principles for systemically important payment systems ; recommendations for securities settlement systems ; and recommendations for central counterparties. as part of this effort, the principles strengthen the “ responsibilities of authorities. ” this includes a new framework for cooperation among financial authorities. it calls for central banks, market regulators, and other relevant authorities to cooperate with each other, both domestically and internationally, and to support each other in fulfilling their respective mandates to promote the safety and efficiency of fmis. this builds upon existing frameworks that have already been used successfully by cpss and iosco for effective cooperation in the oversight of global institutions. such cooperation can facilitate more comprehensive oversight, improve efficiency and effectiveness, reduce or eliminate any gaps in regulation, supervision, and oversight, and minimize potential duplication of effort and burden on both the fmis and the

that might lend to a ccp in extremis will be repaid. to help ensure that these safeguards are met, a major part of the reform effort is to establish a strong set of principles for financial market infrastructures. these principles must embody the four safeguards and ensure that the infrastructure can withstand any stresses that could plausibly occur. the process of developing such a set of principles began about two years ago and is now nearing completion. so why the new principles and what do they embody? during the crisis, financial market infrastructures performed very well. in fact, fmis were actually a source of strength. they enabled market participants to settle obligations when they came due in a timely way. also, their robustness gave confidence to market participants that they could continue to trade, knowing that the transactions would almost certainly be settled and cleared without difficulty. despite this excellent record of performance during a period of unprecedented stress, there still is room for improvement. first, future stresses could be more severe or might come in different forms. this could expose vulnerabilities in fmis that have, up to now, not been visible. also, extraordinary interventions in the crisis to backstop market function or rescue key financial intermediaries may have prevented the stress level from reaching the point where fmis couldn ’ t perform their functions. because there can be no assurance that such interventions will necessarily occur in the future, it is important that the stability of the fmi architecture not depend on timely extraordinary interventions. second, under the new regime of central clearing for standardized otc derivatives trades, the role of fmis will become even more important in the future. moreover, the new regime will lead to the development of new types of fmis. ccps for otc derivatives will become widespread – and trade repositories will be established. principles are needed to underpin these new institutional arrangements. third, for fmis to be resilient they would undoubtedly need to have some ability to access central bank services, including the lender of last resort function. but, if fmis had access to such services, this would create moral hazard. the best way to address this conundrum is to hold the fmis to tougher global standards. fourth, a stronger and better system of fmi governance and oversight can help to ensure that those systems that support a global market are subject to consistent standards regardless of the jurisdiction where they operate. relying solely on a patchwork of differing national