Trade Bodies Warn On CSDR Mandatory Buy-In
ICMA’s AMIC and the IA have written to Executive Vice-President Dombrovskis of the European Commission, on behalf of their members, expressing concerns about the potential bond market impacts of the CSDR mandatory buy-in provisions (due to come into force in early 2021).
The @ICMAgroup Asset Management and Investors Council and the @InvAssoc wrote to @EU_Finance @VDombrovskis expressing concerns about the potential bond market impacts of the CSDR mandatory buy-in provisions.
You can read the letter here ⤵️https://t.co/PDfQpFqNv1
— ICMA (@ICMAgroup) February 3, 2020
The regulatory initiative is widely expected to have negative implications for European bond market efficiency, liquidity, and stability, creating additional, and largely unwarranted risks for investors.
Representing European and global buy-side institutions, the Asset Management and Investors Council and the Investment Association encourage the European Commission to undertake a robust market impact assessment of the mandatory buy-in provisions before attempting implementation.
In the absence of such an analysis, as a minimum, the associations request a cautious, phased-in approach to minimize potential disruption to the European markets.
They aim to help mutual clients reduce the cost of margin management.
The association has sent a letter to European Commission and ESMA on the lack of regulatory clarification.
Increased margins may cause a liquidity squeeze as banks need to fund corporates and households.
Covid-19 has delayed bilateral margin requirements by one year.
Client ability to meet margin calls is a major worry in the medium term.