ICMA has published a discussion paper on CSDR mandatory buy-ins and securities financing transactions. The paper is intended to complement ICMA’s previous work on the topic of CSDR Settlement Discipline, due to come into force in September 2020, and focuses more specifically on the implementation challenges for in-scope repo and securities lending markets.
Currently, SFTs have their own contractual provisions in the event of a settlement fail, laid out in the relevant GMRAs and GMSLAs. Buy-ins, as utilized in the outright cash markets, generally do not apply to SFTs. However, under the new regulation, SFTs with terms of 30 business-days or longer will be in scope of the mandatory buy-in provisions. This creates a number of complications and ambiguities which the paper seeks to explore and discuss. In doing so, it also intends to lay the ground-work for constructive dialogue between market participants and the regulatory authorities to resolve the various challenges and support successful implementation, with minimal disruption to market functioning and liquidity.