Firms must use available tools to mitigate CSDR implementation impact
08 March 2019 London
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It is vital that firms utilise currently available tools to mitigate the impact of Central Securities Depository Regulation (CSDR) on legacy upgrades and technology solutions, according to Robert Frost and James Bell of Pirum.
In an article in the International Securities Lending Association's securities lending market report, the Pirum duo said that the timeframe around the implementation of CSDR has the potential to interfere with firms looking to technology to overcome regulatory challenges, making it vital that they utilise available tools to mitigate the economic and reputational impact.
Specifically, the regulation has the potential to interfere with firms looking to upgrade legacy systems or build a technology solution to assist in overcoming CSDR's challenges.
Pirum's Frost, head of product development and Bell, product analyst, suggested that CSDR will pose numerous other challenges for securities finance participants.
They noted that CSDR does not only introduce measures for the authorisation and regulation of EU CSDs but sets out to increase the safety and efficiency of securities settlement infrastructures in the EU.
Importantly this will apply to any transaction that is due to settle on an EU CSD, regardless of where the trading entity is domiciled.
They stated: “Perhaps CSDR has not received as much attention or press as the second Markets in Financial Instruments Directive (MiFID II), Securities Finance Transactions Regulation (SFTR) or Brexit to date, however, the reality of CSDR and its strict settlement discipline regime has the potential to present market participants with difficult challenges.”
While there are overlaps between SFTR and CSDR, the European Securities Markets Authority has "largely tried to avoid market participants duplication their reporting requirements by removing fields such as ‘place of settlement’ which appeared in the first consultation papers", according to Frost and Bell.
“Ultimately market participants who ensure that robust technology solutions and processes are in place well before September 2020 will help protect themselves against the many risks posed by CSDR and SFTR," they explained.
In an article in the International Securities Lending Association's securities lending market report, the Pirum duo said that the timeframe around the implementation of CSDR has the potential to interfere with firms looking to technology to overcome regulatory challenges, making it vital that they utilise available tools to mitigate the economic and reputational impact.
Specifically, the regulation has the potential to interfere with firms looking to upgrade legacy systems or build a technology solution to assist in overcoming CSDR's challenges.
Pirum's Frost, head of product development and Bell, product analyst, suggested that CSDR will pose numerous other challenges for securities finance participants.
They noted that CSDR does not only introduce measures for the authorisation and regulation of EU CSDs but sets out to increase the safety and efficiency of securities settlement infrastructures in the EU.
Importantly this will apply to any transaction that is due to settle on an EU CSD, regardless of where the trading entity is domiciled.
They stated: “Perhaps CSDR has not received as much attention or press as the second Markets in Financial Instruments Directive (MiFID II), Securities Finance Transactions Regulation (SFTR) or Brexit to date, however, the reality of CSDR and its strict settlement discipline regime has the potential to present market participants with difficult challenges.”
While there are overlaps between SFTR and CSDR, the European Securities Markets Authority has "largely tried to avoid market participants duplication their reporting requirements by removing fields such as ‘place of settlement’ which appeared in the first consultation papers", according to Frost and Bell.
“Ultimately market participants who ensure that robust technology solutions and processes are in place well before September 2020 will help protect themselves against the many risks posed by CSDR and SFTR," they explained.
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