Chapter III of the CSDR Settlement Discipline regulations introduces several measures, to prevent and address settlement fails and encourage market participants to settle transactions on the intended settlement date.
These measures include a harmonised settlement penalties regime, mandatory buy-ins, and common settlement features across the EU such as partial settlement and hold & release.
The Settlement Discipline Regime (SDR) will apply to all transactions intended to settle on an EEA CSD which are traded on a EU trading venue or cleared by a EU CCP.
Such transactions can be in transferable securities, money-market instruments, units in collective investment undertakings, and emissions allowances. Shares with a principle trading venue located in a 3rd country are excluded.
It will apply to all trading level entities - regardless of domicile - whether directly as CSD participants, or indirectly via a settlement or clearing agent.
This new regime will require new processes that will result in cost, liquidity and risk challenges. This is where Euroclear, as the largest group of CSDs in the EU has always brought value to its clients. CSDR Settlement Discipline will be no different.
Euroclear Bank, Euroclear UK & Ireland and the ESES group (Belgium, France and The Netherlands) of central securities depositories have elected to use Taskize to help their clients overcome the challenge of CSDR.
Taskize is already widely used by firms to resolve settlement issues both before and after settlement date so extending this usage to cover the new buy-in process is the most simple and efficient course of action.
The complexities that come with the implementation of the settlement discipline regime will be a new experience for many of our clients.
To help shed some light on the new landscape, the below timeline takes you through the potential steps you can encounter, from trade date to the conclusion of a buy-in.
The time between the trade date and the intended settlement date of a transaction.
During this time period, clients will - just as they do today - be able to address and resolve matching and other settlement problems that could result in failing trades.
Consult the table below to find out more on how you can identify and resolve your failing transactions.
The time between the intended settlement date and the beginning of the buy-in period.
During this period, CSDR will impose daily penalty fees on the trading party that is responsible for the late settlement of a transaction.
Our solutions provide assistance in the fail resolution process and thereby help you reduce the fees you have to pay.
The time after the extension period as of which transactions, that continue to fail for lack of securities, will be subject to the mandatory buy-in process imposed by CSDR.
Buy-in is not possible
There will be occasions where, often for reasons of reduced liquidity, a buy-in is impossible to execute. In this situation, the seller will be required to pay a cash compensation to the buyer.
The table below details the steps that you may encounter along the way, and introduces the solutions that will help make the process as simple and efficient as possible.
Buy-in is possible
During this period, firms will have to cope with completely new processes and handle interactions with parties they are not used to dealing with.
The table below details the steps that you may encounter during the buy-in period, and introduces the solutions that will help make the process as simple and efficient at possible.
Use Taskize to inform all involved parties of the settlement status of the buy-in
In case of partial settlement, the Taskize checklist will advise on the necessary actions to ensure that penalties continue to accrue only for the outstanding amount
You can also use your existing business reporting solution to receive settlement status updates
Upon finality of the buy-in process, the receiving CSD participant can generate a buy-in bubble in Taskize and invite Euroclear into the bubble to automatically share all relevant buy-in details
Alternatively, you can send us an MT530 Swift message including the aggregated number & value of financial instruments bought in as well as the cash compensation amount, if any