CSDR: The final countdown
In September 2019, we published our CSDR: Settlement discipline regime client toolkit, to help clients prepare for the most impactful aspects of the new regulation. While the implementation date was subsequently pushed back, challenges remain ahead of the revised date of 1 February 2022. Our new toolkit provides an update on where we stand on this journey
The Central Securities Depositories Regulation (CSDR)’s Settlement Discipline Regime (SDR) was originally scheduled to come into force from 14 September 2020. Due to unforeseen challenges, however, this deadline was subsequently extended on two occasions, meaning that the SDR will now take effect from 1 February 2022.
However, in recent regulatory developments it has been agreed that the controversial mandatory buy-in regime will be postponed and will break free from its settlement discipline siblings, most notably cash penalties, which will enter into force as planned on 1 February 2022. This is not the end for the mandatory buy-in though, which is back under the microscope through the European Commission’s review of CSDR. A legislative proposal for this is expected in Q1 2022, which the industry hopes will provide an alternative to the ‘mandatory’ nature of the buy-in regime.
One of the main objectives of the regulation is to improve the safety and efficiency of securities settlement in the European Economic Area (EEA), and to achieve it, the SDR introduces a set of measures to prevent and address failures in the settlement of securities transactions. But this is more than just a compliance exercise – the SDR will have far-reaching impacts that affect all actors in the securities lifecycle, from investors to central securities depositories (CSDs).
So, with much at stake, what preparations need to be made? Market participants are required to carry out an overhaul of their front-to-back operational, communication and escalation processes, while gaining a complete end-to-end understanding of the regulation and how it impacts business and operational processes. With so much to do, and so little time to do it, now is the time for the industry to redouble its efforts to cross the finish line.
With the new deadline looming large on the horizon, we have updated our 2019 toolkit to help clients prepare for the incoming regulation. This latest edition excludes the mandatory buy-in and provides suggestions on how to respond to the demands of the regulatory requirements that are due to enter into force on 1 February 2022, while exploring the repercussions they will have on trade and post-trade industries alike. We hope it proves a useful resource.
Global Head of Securities Services and Regional Head of Corporate Bank UK and Ireland, Deutsche Bank
Director, Securities Regulation & Market Reform, Deutsche Bank