Settlement Discipline Regime penalty dry run started on 20 September in Finland

24/09/2021

As part of the Central Securities Depositories Regulation (CSDR), Settlement Discipline Regime (SDR) will start on 1 February 2022. The purpose of SDR is to prevent and address settlement fails and encourage the market participants to settle transactions on their intended settlement date.

SDR introduces rules for cash penalties and buy-ins across all CSDs in the European Economic Area. The CSDs are required to collect cash penalties from the participant that caused a settlement transaction to fail and to redistribute the cash penalties to the participant suffering from the settlement fail.

Prior to the regulation coming into force, Euroclear Finland launched its Penalty Engine for a dry run period on penalties for settlement. The dry run period started on 20 September, marking an important milestone in the Finnish market’s Infinity T2S roadmap. The majority of participants take already part in the dry run period, and initial signs from the first days have shown that the system works smoothly.

"This dry run period is essential for us and for our stakeholders to really see how the penalties mechanism works. The calculation of penalties is done by the Infinity Penalty Engine, based on the settlement calendar. The Penalty Engine is a state-of-the-art and powerful enhancement to the core system that utilizes data required for the penalty calculation form the various sources. The engine is built with capability to handle even the biggest volume peaks that our market might face", explains Tobias Burton, Manager from Settlement and Register Services at Euroclear Finland. He continues:

"We support market readiness for the penalty regime by offering the dry run with actual production data but without cash collection and redistribution. Thus, our participants have the possibility to see in practice what their eventual penalties would be with their production volumes".

Euroclear Finland is closely monitoring the settlement activity and penalties throughout the dry run period to better understand the impacts it will eventually have on the market performance. We will share and discuss the findings from the dry run period with the market participants on a continuous basis. Additionally, current settlement date extension fees charged by Euroclear Finland will be removed once the SDR will start on 1 Febuary 2022.

Further information:

Settlement & Register Operations
Tel: +358 20 770 6559