CSDR – Central Securities Depositories Regulation

Settlement Discipline in Asset Management

Regulatory background

On 17 September 2014, the Regulation (EU) No 909/2014 on the improvement of securities settlement in the European Union and through Central Securities Depositories as well as for changing Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 entered into force. The third pillar for improving settlement discipline, focusing on increasing settlement efficiency and avoiding failed settlements, will become effective on 1 February 2021.

Due to the current market situation, the numerous implementation challenges, regulatory uncertainties and the lack of Level 3 Guidelines, the ECSDA contacted the EU Commission requesting to postpone the entry into force of the settlement discipline for another year.

Download CSDR PDF
German

Overview of the main challenges

Avoidance
  • All financial participants under CSDR regulation are encouraged to make their settlement processes more efficient.
  • In the future, a rate must be specified in mandatory fields in the context of the trade confirmation/ allocation. A time limit of 2 hours must be observed.
  • All other measures with a focus on avoiding settlement failures have to be developed by the financial service providers themselves.
Buy-In
If the security is not delivered by the last day of the extension period, there is an extension period (4 or 7 days).
  • If the security is not delivered by the last day of the extension period, a mandatory buy-in (coverage obligation) is carried out via a buy-in agent.
  • The buy-in agent procures the security on the market and delivers it to the buyer.
  • If the execution of the buy-in is only partially successful or not successful at all, cash compensation is paid to the party that did not fail.
  • The costs associated with the buy-in and price differences will be charged to the failed party.
  • The penalty fee is between 0.1 bp (public bonds) and 1 bp (liquid shares).
Penalty
  • Penalty mechanism for transactions not completed in time.
  • A fine is imposed for each business day after the scheduled value date on which a transaction is not settled.
  • The amount and duration of the penalty calculation depends on the type of security and liquidity.
  • Late Matching Fail Penalties (LMFP): Instructions that are matched after the ISD. The last person to match his or her instruction is charged with LMPF.
  • Settlement Fail Penalties (SEFP): Settled settlement instruction that has reached its value date and has not yet been settled.

Why NEXGEN Business Consultants?

Analysis and inventory  

Based on years of experience in the implementation of regulatory requirements and the associated expertise, we have developed an analysis methodology that enables us to efficiently identify new requirements and implement them immediately. In addition, we are also able to perform optimizations of existing setups.

In addition, we have extensive expertise in European reporting requirements and in in-depth settlement and product experience.

    Project steering and controlling  

    We place our clients at the centre of our activity through our efficient, fast and solution-oriented action. Here we pay particular attention to professionalism and consistency during the realization. Successfully carried out projects, high expertise and targeted training of our consultants are our basis to successfully complete projects in a structured and transparent manner.

      High quality and sustainability 

      We operate in a highly professional market environment in which we convince our clients through sustainable competence, continuous willingness to change and high service quality. Our quality standards ensure the highest level of service quality. We not only want to satisfy our clients, but to inspire them in the long term.

        Trinh Kersting

        Managerin

        Tel.: +49 151 202 894 39
        E-Mail: trinh.kersting@nexgenbc.com

        Sascha Schönsiegel

        Senior Consultant

        Tel.: +49 178 239 67 87
        E-Mail: sascha.schoensiegel@nexgenbc.com

        v

        We are at your disposal for a conversation. Contact us!

        Disclaimer   

        The greatest care has been taken in the preparation of the content, but changes, errors and omissions are reserved. The statements made are based on judgments, historical data and legal assessments at the time of preparation of the content. All information is given without guarantee for the correctness and completeness of the content. The transfer of the content is only for the internal use of the recipient. The treatment does not constitute any legal or investment advice. This must be done individually taking into account the circumstances of the individual case.