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The Association for Financial Markets in Europe (AFME) has released comment on the EU Council and European Parliament’s provisional CSDR political agreement, also known as CSDR Refit.
The proposed law aims to reduce the financial and regulatory burden on central securities depositories (CSDs) and improve their ability to operate across borders, while also strengthening financial stability.
In a statement commenting on the planned legislation, Peter Tomlinson, director of post trade at the AFME, says: “AFME welcomes the political agreement [...] which views mandatory buy-ins as a measure of last resort.”
The CSDR Refit contains measures to improve efficiency by amending certain elements of the settlement discipline regime, including the preconditions for applying mandatory buy-ins. Under the proposed law, buy-ins will be activated subject to assessment and only in the case where the level of settlement fails in the EU has not reduced and is deemed to pose a financial stability risk.
While settlement efficiency has slowly improved since the adoption of the 2014 regulation, it is still lower than in other developed capital markets, says the EU Council.
The new regulation has also been proposed to make it easier for CSDs to offer services across borders and improve cooperation among supervisors.
In cases where a CSD’s activities in at least two other Member States are considered to be of substantial importance to the functioning of the securities markets and investor protection, a college will be set up to facilitate cooperation and information exchange between Member State authorities. Supervisors will also have access to better information about the activities of non-EU CSDs operating in the EU.
In addition, the proposed law would be put in place to create a simpler passporting regime. The current passporting regime is “lengthy and burdensome and discourages cross-border services,” according to the EU Council.
“The text clarifies and simplifies the rules, thus reducing the barriers to cross-border settlement and easing the administrative and financial burden,” it adds.
Elisabeth Svantesson, Swedish minister for finance, comments: “CSDs are vital to the EU’s financial system and for the Capital Markets Union, yet they still face obstacles in terms of high costs and excessive red tape. [The agreement] will help us unlock the full potential of the EU’s capital markets, making them more attractive to investors.”
Commenting further on the decision, AFME’s Tomlinson says: “The CSDR Refit legislation in the EU will include a mandate for ESMA to undertake an assessment on the possibility of shortening the settlement cycle in the EU.
“AFME looks forward to engaging with European authorities and market participants on this topic as part of the new European industry Task Force which was established by AFME earlier this year.
“The task force will examine all aspects in this debate, including direct economic costs and savings to the industry, as well as factors relating to global alignment and market attractiveness.”
