ESMA postpones CSDR settlement discipline regime
The European Securities and Markets Authority (ESMA) has postponed the Central Securities and Depositories Regulation (CSDR) settlement discipline regime (SDR), with the regulation now coming into effect on 1 February 2021.
Buy side firms worry about SDR’s impact on liquidity
In its Final Report on the matter, ESMA writes that it considers it appropriate to allocate more time before the start of the application of SDR.
The news means that market participants have an extra six months to prepare. The previous deadline had been set at 13 September 2020.
“Given the extensive IT developments which are needed for the implementation of the new settlement discipline requirements, stakeholders have highlighted the need for more time before the entry into force of the already published [standards] on settlement discipline,” ESMA writes.
Industry bodies wrote to EMSA in January to lobby for the rule change, including the Association for Financial Markets in Europe (AFME), the International Capital Market Association (ICMA), the Alternative Investment Management Association (AIMA), and the International Securities Lending Association (ISLA).
Related: ESMA issues final report on SFTR, tackles non-EU LEIs
CSDR is one of the key regulations adopted in the aftermath of the financial crisis and is part of a wide range of post-crisis EU regulatory reforms, including the European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Directive II (MiFID II).
CSDR introduces new measures for the authorisation and supervision of EU Central Security Depositories (CSDs). It came into force across all EU member states on 17 September 2014.
SDR, a section of the CSDR regime, includes measures to improve settlement efficiency, such as cash penalties for fails.
Market participants are concerned that SDR will require significant IT system changes at a market level (CSD, central counterparties, and trading venues), at a messaging level (Swift and other confirmation platforms) and adjustments to legal arrangements between all parties concerned.
