Document ID: chunk:federal_register_of_legislation:F2024C00507:body:0:p24
Version: federal_register_of_legislation:F2024C00507
Segment Type: other
Provision Reference: 
Character Range: 65332–68621

final settlement                       The irrevocable and unconditional transfer of an asset or financial instrument, or the discharge of an obligation by a central counterparty or its participants in accordance with the terms of the underlying contract. Final settlement is a legally defined moment.
financial market infrastructure (FMI)  A multilateral system among participating institutions, including the operator of the system, used for the purposes of clearing, settling or recording payments, securities, derivatives or other financial transactions. Examples of FMIs include central counterparties, securities settlement facilities, securities settlement systems, central securities depositories, payments systems and trade repositories.
general business risk                  Any potential impairment of the central counterparty's financial position (as a business concern) as a consequence of a decline in its revenues or an increase in its expenses, such that expenses exceed revenues and result in a loss that must be charged against capital.
governance                             The set of relationships between a central counterparty's owners, board of directors (or equivalent), management and other relevant parties, including participants, authorities and other stakeholders (such as participants' customers, other interdependent FMIs and the broader market).
haircut                                A risk control measure applied to underlying assets whereby the value of those underlying assets is calculated as the market value of the assets reduced by a certain percentage (the 'haircut'). Haircuts are applied by a collateral taker in order to protect itself from losses resulting from declines in the market value of a security in the event that it needs to liquidate that collateral.
initial margin                         Collateral that is collected to cover potential changes in the value of each participant's position (that is, potential future exposure) over the appropriate close out period in the event that the participant defaults.
investment risk                        The risk of loss faced by a central counterparty when it invests its own or its participants' resources, such as collateral.
legal risk                             The risk of the unexpected application of a law or regulation, usually resulting in a loss.
linked FMI                             An FMI that is connected with one or more other FMIs, either directly or through an intermediary, according to a set of contractual and operational arrangements between the FMIs involved in the link.
liquidity risk                         The risk that a counterparty, whether a participant or other entity, will have insufficient funds to meet its financial obligations as and when expected, although it may be able to do so in the future.
mark to market                         The practice of revaluing securities and financial instruments using current market prices.
money settlement agent                 The entity whose assets are used to settle the ultimate payment obligations arising from securities transfers within a securities settlement facility, or other clearing and settlement activities. Accounts with the money settlement agent are held by settlement banks, which may