The European Commission has today adopted an additional 12-month delay to the implementation of the Central Securities Depositories Regulation’s (CSDR) technical rules on settlement discipline.
CSDR’s settlement discipline regime, which was originally due to go into force in September, and then February 2021, will now come into effect on 1 February 2022.
The regime covers measures to address settlement fails including rules for the trade allocation and confirmation processing, along with cash penalties for failed transactions and mandatory buy-in requirements.
The regulation will affect a wide range of market participants including central securities depositories (CSDs), central clearing counterparties, trading venues, investment firms and credit institutions and will require significant IT system changes, market testing and adjustments to legal arrangements between the parties concerned.
A commission spokesperson tells SLT that the delay aims to give industry sufficient time to finish the development of the “essential IT projects needed for the implementation of EU rules on settlement discipline”.
“We recognise the negative impact of the COVID-19 pandemic on the implementation of IT projects necessary for industry’s compliance with EU rules on settlement discipline,” the commission states in its report on the new timeline. “The pandemic has stretched IT resources; this postponement gives market participants sufficient time to make the final preparations to ensure compliance with EU rules.”
The delay was recommended to the commission by the European Securities and Markets Authority in August where it highlighted the “severe impact” of the pandemic on the overall implementation of regulatory and IT projects by CSDs and their participants, as well as by other financial market infrastructures.
ESMA explained that it would be “extremely difficult” for market stakeholders to comply with the requirements of the regulatory technical standards on settlement discipline by the 1 February 2021 deadline.
Today’s confirmation of the delay will not be a surprise to the market participants in CSDR’s orbit.
The regime has garnered considerable criticism from multiple areas of the market and the delay is widely seen as an opportunity to re-open the rule book and potentially amend the mandatory element of the buy-in regime, among other issues.
A public consultation on CSDR, including the regime, is expected to begin in the coming weeks followed by an official review of the regulation as part of the EU’s Capital Markets Union action plan, which will inspect a narrower aspect of the framework.
