Joint Trade Association Letter regarding Implementation of the CSDR Settlement Discipline Regime
We support the imposition of a penalty regime under CSDR as an important step towards improving settlement efficiency in European capital markets. However, we continue to be concerned that the impact of a mandatory buy-in regime will have negative consequences that are damaging to market liquidity and efficiency and restrict the growth of capital markets in Europe.
We respectfully request the authorities to consider a cautious, phased-in approach to ensure the successful implementation of the cash penalty regime and reconsider the mandatory nature of the buy in.
- Introduce cash penalties once market infrastructures, banks and their clients have built and tested the required new messaging and technology.
- Deferral of the mandatory buy-in regime until the effects of penalties and other measures (e.g. prompt allocation/confirmation processes) to promote settlement efficiency are implemented. An in-depth impact analysis should be undertaken by the Commission during this period on the potential impact of introducing a mandatory buy-in.
- Implement monitoring processes to measure the impact of the penalty regime on settlement efficiency.
- Replace the mandatory nature of the buy-in with an optional right of the receiving party, underpinned by law, to allow a buy-in of a non-delivering counterparty. Address the asymmetrical issues relating to buy in costs. The topic of cash compensation should be thoroughly reassessed.
The full letter is available at https://www.isla.co.uk/wp-content/uploads/2019/03/Joint_Associations_Letter_EC_ESMA_CSDR.pdf