CSDR solutions must be built to adapt, says regulatory expert
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CSDR solutions must be built to adapt, says regulatory expert 13 May 2020London Reporter: Natalie Turner
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Vendors offering solutions for the incoming Central Securities Depositories Regulation (CSDR) will need to prove they are flexible and able to roll with amendments after go-live, says Meritsoft鈥檚 head of regulation, Daniel Carpenter.
Speaking to SLT on the latest developments with the controversial rules framework, Carpenter explains that firms 鈥渨ill also be looking to ensure that the external or internal partner they are working with has the flexibility to change their system or solution, as necessary鈥�.
The comments come shortly after the chair of the European Securities and Markets Authority (ESMA) dismissed industry concerns that the rules framework aimed at improving settlement discipline would cause more harm than good.
In response to a letter sent from several industry bodies, Steven Maijoor confirmed that the delayed go live, from September to February 2021, was acceptable but that no changes would be made to the actual terms of CSDR until after go-live.
In this context, Carpenter says: 鈥淗ouses will be looking for some form of contractual commitment from their vendor that demonstrates an understanding that houses are delivering a solution for which requirements may change.
鈥淏y going with a vendor, houses get certainty that they are obtaining one solution for the whole of the market. Crucially, the solution will be future-proofed and will be supported and developed by leveraging multiple business input and rule interpretations, as well as the vendor鈥檚 own expertise.鈥�
CSDR aims to improve settlement rates by imposing cash penalties for fails along with a mandatory buy-in requirement.
However, there is from several market sectors that its settlement discipline regime, which includes the mandatory buy-in provisions, are not fit-for-purpose.
As of last Friday, the ESMA鈥檚 proposal to push back the implementation of CSDR until 1 February 2021 to solve separate 鈥渢echnical impossibilities鈥� in the original timetable relating to ISO updates not due until the annual November SWIFT update.
Despite the misgivings, Carpenter is bullish that CSDR will improve market standards.
鈥淐SDR has been introduced because of best practice,鈥� he explains. 鈥淓SMA is encouraging best practice so that market participants are prepared to carry out their work on time. The authority is trying to level the playing field and balance the books for all market participants.鈥�
To read the full interview with Meritsoft鈥檚 Daniel Carpenter click .
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