ESMA releases new answers on CSDR
08 February 2018 Paris
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The European Securities and Markets Authority (ESMA) has updated its Q&A on the implementation of Central Securities Depository Regulation (CSDR).
CSDR, which entered into force on 17 September 2014, will soon pose particular challenges to the securities financing market as it includes fines for settlement failure on transactions and mandatory buy-ins.
The International Securities Lending Association and other industry bodies are working with regulators to minimise the potential damage such a rule could cause to market liquidity and trading volumes.
Among the new questions was: “Should a central securities depository (CSD) intending to provide data reporting services [...] as ancillary services comply with the relevant requirements set out in the second Markets in Financial Instruments Directive (MIFID II)?”
ESMA stated that the general comment regarding this was: “Yes, a CSD intending to provide data reporting services (listed in Section D of Annex I to MIFID II) should comply with the relevant requirements set out in MIFID II.”
In terms of organisational requirements, ESMA asked respondents: “Could a CSD share its risk monitoring committees with other entities of the same group?”
The general consensus to this was that each CSD should have its own risk monitoring committees.
ESMA also asked correspondents: “Does Target2-Securities (T2S) qualify as a critical service provider within the meaning of Article 68 of the regulatory technical standards on CSD requirements?” To which the general feeling was “no. When [T2S firms] outsource some of their services or activities to a public entity, the framework has been jointly agreed and formalised by the public entity and the relevant CSD.”
ESMA added that it has also been “agreed by the competent authorities on the basis of the requirements established in the CSDR”.
ESMA stated the purpose of the Q&A, and it’s recent additions, is to “promote common supervisory approaches and practices in the application of CSDR”.
It provides responses to questions posed by the general public, market participants and national competent authorities in relation to the practical application of CSDR to ensure that their supervisory activities and actions meet ESMA requirements.
CSDR, which entered into force on 17 September 2014, will soon pose particular challenges to the securities financing market as it includes fines for settlement failure on transactions and mandatory buy-ins.
The International Securities Lending Association and other industry bodies are working with regulators to minimise the potential damage such a rule could cause to market liquidity and trading volumes.
Among the new questions was: “Should a central securities depository (CSD) intending to provide data reporting services [...] as ancillary services comply with the relevant requirements set out in the second Markets in Financial Instruments Directive (MIFID II)?”
ESMA stated that the general comment regarding this was: “Yes, a CSD intending to provide data reporting services (listed in Section D of Annex I to MIFID II) should comply with the relevant requirements set out in MIFID II.”
In terms of organisational requirements, ESMA asked respondents: “Could a CSD share its risk monitoring committees with other entities of the same group?”
The general consensus to this was that each CSD should have its own risk monitoring committees.
ESMA also asked correspondents: “Does Target2-Securities (T2S) qualify as a critical service provider within the meaning of Article 68 of the regulatory technical standards on CSD requirements?” To which the general feeling was “no. When [T2S firms] outsource some of their services or activities to a public entity, the framework has been jointly agreed and formalised by the public entity and the relevant CSD.”
ESMA added that it has also been “agreed by the competent authorities on the basis of the requirements established in the CSDR”.
ESMA stated the purpose of the Q&A, and it’s recent additions, is to “promote common supervisory approaches and practices in the application of CSDR”.
It provides responses to questions posed by the general public, market participants and national competent authorities in relation to the practical application of CSDR to ensure that their supervisory activities and actions meet ESMA requirements.
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