CSDR February push back gets EU Commission approval
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CSDR February push back gets EU Commission approval 12 May 2020Brussels Reporter: Drew Nicol
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The European Commission has endorsed the European Securities and Markets Authority's (ESMA) proposal to push back the implementation of the Central Securities Depositories Regulation (CSDR) until 1 February 2021.
CSDR aims to improve settlement rates by imposing cash penalties for fails along with a mandatory buy-in requirement.
The settlement discipline regime was originally due to come into effect in September but 鈥渢echnical impossibilities鈥� around the implementation of IT solutions of industry stakeholders and the fact that an essential ISO update due from SWIFT would not be in place until its annual November update scuppered this timeline.
has been circulating at least as far back as November 2019 based on the SWIFT update timetable making a September go-live untenable.
On Friday, the commission acknowledged ESMA鈥檚 concerns raised in its filed on 4 February which flagged these issues and suggested a push-back, which has now been accepted.
In its February report, ESMA noted that information from the European Central Bank showed that a go-live prior to February 鈥渨ould put a high risk on the quality of the software delivered in production due to shorter development and/or testing times and is not deemed manageable鈥�.
鈥淟ikewise鈥�, ESMA added 鈥渕arket readiness is also under tight constraints with the current implementation timeline. Finally, it would also require a change in the SWIFT ISO standards release yearly schedule which is agreed among stakeholders worldwide (21-22 November)鈥�.
Having got the nod from the commission, the proposal has now entered a non-objection period of one month. An additional review month may be requested by either the European Parliament and the European Council.
If no objections are raised the amended timeline could be accepted by early June.
ESMA鈥檚 basis for the delay was almost solely couched in the technical difficulties and timeline clash with ISO, and largely side-stepped other by stakeholders that the settlement regime itself is not fit for purpose and requires substantial amendments.
Shortly before ESMA鈥檚 appeal for a delay in February, lobbied the securities market regulator for several major changes to the settlement regime, including for the buy-ins to no longer be mandatory as it could would an asymmetrical market dynamic.
In April, ESMA鈥檚 chair Steven Maijoor responded to the letter to confirm that no changes would be made prior to go-live as the evidence presented by the trade bodies had failed to sway the authority of the need to re-open to the rulebook at this time.
The , which was one of the letter鈥檚 signatories, has since vowed to continue pushing for changes before February.
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