UK鈥檚 exclusion of CSDR鈥檚 settlement discipline regime set to create new challenges
25 June 2020 London
Image: Sven Hansche/Shutterstock.com
The UK鈥檚 exclusion of the Central Securities Depositories Regulation鈥檚 (CSDR) settlement discipline regime as part of its adoption of EU regulations post Brexit, will 鈥渦ndoubtedly create new challenges for firms in the UK鈥�, according to Neil Vernon, CTO at Gresham Technologies.
On 23 June, the chancellor of the exchequer Rishi Sunak confirmed several major updates to the UK鈥檚 Brexit plans for adopting EU rules frameworks in a written statement that will radically impact the country鈥檚 securities services market participants.
Vernon explained that firms impacted by CSDR are likely to be settling in both EU and UK regulatory regimes and 鈥渁ny divergence will add a degree of complexity to the settlement process and so from a business process perspective鈥�.
Commenting on the announcement, Daniel Carpenter, head of regulation at Meritsoft, said: 鈥淎s the majority of capital markets firms operate globally, having footholds or transactions flowing through the EU, UK, US and Asia Pacific regions, and will, therefore, be pulled into CSDR.鈥�
He added: 鈥淪pecifically, there will be many UK-based investment managers who will be settling transactions across the EU and will need to make sure that they are compliant with this regulation."
Carpenter explained that the regulation highlights that reducing the number of trade fails is best practice and commercially beneficial and as a result, he suggested 鈥渋mproving processes will no doubt be looked at favourably by UK firms, even following [the] statement鈥�.
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.
On 23 June, the chancellor of the exchequer Rishi Sunak confirmed several major updates to the UK鈥檚 Brexit plans for adopting EU rules frameworks in a written statement that will radically impact the country鈥檚 securities services market participants.
Vernon explained that firms impacted by CSDR are likely to be settling in both EU and UK regulatory regimes and 鈥渁ny divergence will add a degree of complexity to the settlement process and so from a business process perspective鈥�.
Commenting on the announcement, Daniel Carpenter, head of regulation at Meritsoft, said: 鈥淎s the majority of capital markets firms operate globally, having footholds or transactions flowing through the EU, UK, US and Asia Pacific regions, and will, therefore, be pulled into CSDR.鈥�
He added: 鈥淪pecifically, there will be many UK-based investment managers who will be settling transactions across the EU and will need to make sure that they are compliant with this regulation."
Carpenter explained that the regulation highlights that reducing the number of trade fails is best practice and commercially beneficial and as a result, he suggested 鈥渋mproving processes will no doubt be looked at favourably by UK firms, even following [the] statement鈥�.
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.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities 麻豆影视传媒 Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities 麻豆影视传媒 Times
