02.05.2020

ESMA Postpones CSDR Mandatory Buy-In

The European Securities and Markets Authority (ESMA) has published a Final Report actioning the postponement of the Central Securities and Depositories Regulation (CSDR) settlement discipline regime RTS (which includes the mandatory buy-in regime), until 1 February 2021.

CSDR No. 909/2014/ EU is a crucial piece of regulation implemented as an outcome of the financial crisis during 2007-2008, to ensure that the financial system becomes more resilient by strengthening the core infrastructures.

The regime will affect a wide range of market participants (CSDs, CCPs, trading venues, investment firms, credit institutions) and authorities, and will require significant IT system changes, market testing and adjustments to legal arrangements between the parties concerned.

In the Report, ESMA acknowledges amongst other things, the considerable aforementioned developments required, and considers it appropriate to provide for more time before the start of the application of the new settlement discipline requirements under the RTS.

This has now been submitted to the European Commission, and ESMA is submitting the draft regulatory technical standards presented in the Annex for endorsement in the form of a Commission Delegated Regulation (a legally binding instrument applicable in all Member States of the European Union). Following the endorsement of the RTS by the European Commission, the Commission Delegated Act will be sent to the European Parliament and Council for final scrutiny.

To access a copy of the Final Report, please click here

ISLA welcomes ESMA’s announcement of a request to postpone implementation of CSDR settlement disciplines, and will continue to collaborate with other trade associations in:-

  • Clarifying the SFT requirements of this regulation;
  • Requesting guidance from ESMA on points that its members are unclear on;
  • Providing members with guidance on best practice.

Source: ISLA

Heiko Stuber, senior product manager at SIX,  said in an email: “Market participants can’t afford to waste this additional time afforded to them by ESMA wisely. The main challenge is that custodians are struggling to access the granularity of information needed to assess the financial instruments that could fail to settle under CSDR.

“While they may be able to get cash amounts from the failing settlement counterparty, a custodian can’t easily get hold of the reference and price data being used to work out exactly how the penalties were calculated. This includes really important insights such as how to determine the market valuation of any given instrument, not to mention the closing price of the most relevant market within the EU.”

Daniel Carpenter, head of regulation at Meritsoft, said in an email:  “A delay was being talked about previously and for many participants this has been built into their 2020 plans and budgets. The houses we are speaking to have ramped up their resources as well as their plans, and are focused on parallel runs before the end of the year to improve fails management processes and client engagement, well in advance of this new date.”

Sean Tuffy, head of regulatory intelligence, custody & fund services at Citi, said:

The European Securities and Markets Authority (ESMA) has published a Final Report actioning the postponement of the Central Securities and Depositories Regulation (CSDR) settlement discipline regime RTS (which includes the mandatory buy-in regime), until 1 February 2021.

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