ICMA advises on CSDR’s mandatory buy-in provision

The International Capital Market Association (ICMA) published a report on the potential market consequences of one of the provisions of the Central Securities Depository Regulation (CSDR), entitled: ‘How to survive in a mandatory buy-in world’.

While CSDR deals mainly with the regulation of Europe’s settlement systems, it contains a section on ‘settlement discipline’, which includes measures to improve settlement efficiency, such as cash penalties for fails. Among these is the provision for mandatory buy-ins. ‘How to survive in a mandatory buy-in world’ seeks to explain the additional market risks and economic uncertainties the CSDR buy-in regime will create for bond market participants, both buyers and sellers, as well as intermediaries and lenders of securities. It explores the adverse and often conflicting behavioral incentives which will face market participants as they try to minimize these risks and the potential to incur losses beyond their control.

Martin Scheck, ICMA’s Chief Executive said: “The CSD Regulation, while undoubtedly well-intentioned, will in one respect present major challenges for anyone transacting business in the European cross-border bond markets. This report prepared by ICMA’s secondary bond market committee of active bond market participants aims to make clear the consequences of making buy-ins mandatory, well in advance of the regulation coming into force in two years’ time”.

Read the full release

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