The entire 2020 regulatory timetable may be compromised, says reg policy expert
30 March 2020 London
Image: Shutterstock
The COVID-19 pandemic has the potential to disrupt the entire 2020 regulatory timetable, a senior director at ICMA has warned.
The spread of the coronavirus which has already caused delays for the first phase of the
Securities Financing Transactions Regulation (SFTR) and Basel III, is still a threat to all other go-live dates scheduled for this year, the International Capital Market Association’s (ICMA) senior director for market practice and regulatory policy, Andrew Hill, tells SLT.
With SFTR re-scheduled for July, concerns have now been raised that the knock-on effect of the loss of productivity during these final months means that the Central Securities Depositories Regulation’s (CSDR) already belated settlement discipline regime is also facing further delays.
“The COVID-19 pandemic has the potential to impact the 2020 regulatory timetable beyond SFTR, the implementation of mandatory buy-ins under CSDR for example, as the industry tries to work with regulators while grappling with the challenges of volatile markets and remote working,” Hill says.
CSDR’s settlement discipline regime was originally due to come into force on 13 September but was delayed until February 2021 following a massive coordinated lobbying effort by a group industry bodies, including ICMA.
The regime aims to reduce settlement fails in a variety of markets by imposing mandatory buy-ins and cash penalties for failed trades.
However, despite such risks, as firms scramble to redeploy their already thinly-stretched development teams to keep core business lines operating smoothly, timelines for meeting new go-live dates are being left by the wayside.
Last week, 22 industry bodies began lobbying global regulators to revise the schedule for the final two waves of the Uncleared Margin Rules to avoid those in-scope being overwhelmed by a series of regulatory deadlines coming close together.
European market overseers including the commission and the European Securities and Markets Authority (ESMA) have so far been reluctant to been seen as giving too much leeway to the financial sector and have only agreed to the shortest possible grace periods for CSDR and SFTR.
In a letter to ESMA sent just prior to the announcement on SFTR’s delay, ICMA and the International Securities Lending Association suggested that October would be the most prudent new go-live date as it was likely to be beyond the worst of the pandemic’s effects. In the end, ESMA only offered until July.
“ESMA paved the way for further delays, but I am surprised that the first delay wasn’t for longer given the status of the virus when the announcement was made,” Consolo director Sarah Nicholson tells SLT.
In calling for a reprieve from the UMR timeline last week, the International Swaps and Derivatives Association explained that the limited clemency offered by regulators on SFTR meant its members would struggle to pivot between the multiple on-coming deadlines in the time given the current disruption.
Over the weekend several governments including in the UK and across the EU predicted that mass quarantines and lockdowns of businesses could stay in place for several more months, raising further questions about the viability of all regulatory deadlines in the short and medium term.
On the prospect of further delays, Hill says: “We [ICMA] will continue to work closely with our members and the cross-border industry to monitor preparedness for regulatory implementation and ensuring that the authorities are fully aware of the practical challenges being created by the pandemic.”
The spread of the coronavirus which has already caused delays for the first phase of the
Securities Financing Transactions Regulation (SFTR) and Basel III, is still a threat to all other go-live dates scheduled for this year, the International Capital Market Association’s (ICMA) senior director for market practice and regulatory policy, Andrew Hill, tells SLT.
With SFTR re-scheduled for July, concerns have now been raised that the knock-on effect of the loss of productivity during these final months means that the Central Securities Depositories Regulation’s (CSDR) already belated settlement discipline regime is also facing further delays.
“The COVID-19 pandemic has the potential to impact the 2020 regulatory timetable beyond SFTR, the implementation of mandatory buy-ins under CSDR for example, as the industry tries to work with regulators while grappling with the challenges of volatile markets and remote working,” Hill says.
CSDR’s settlement discipline regime was originally due to come into force on 13 September but was delayed until February 2021 following a massive coordinated lobbying effort by a group industry bodies, including ICMA.
The regime aims to reduce settlement fails in a variety of markets by imposing mandatory buy-ins and cash penalties for failed trades.
However, despite such risks, as firms scramble to redeploy their already thinly-stretched development teams to keep core business lines operating smoothly, timelines for meeting new go-live dates are being left by the wayside.
Last week, 22 industry bodies began lobbying global regulators to revise the schedule for the final two waves of the Uncleared Margin Rules to avoid those in-scope being overwhelmed by a series of regulatory deadlines coming close together.
European market overseers including the commission and the European Securities and Markets Authority (ESMA) have so far been reluctant to been seen as giving too much leeway to the financial sector and have only agreed to the shortest possible grace periods for CSDR and SFTR.
In a letter to ESMA sent just prior to the announcement on SFTR’s delay, ICMA and the International Securities Lending Association suggested that October would be the most prudent new go-live date as it was likely to be beyond the worst of the pandemic’s effects. In the end, ESMA only offered until July.
“ESMA paved the way for further delays, but I am surprised that the first delay wasn’t for longer given the status of the virus when the announcement was made,” Consolo director Sarah Nicholson tells SLT.
In calling for a reprieve from the UMR timeline last week, the International Swaps and Derivatives Association explained that the limited clemency offered by regulators on SFTR meant its members would struggle to pivot between the multiple on-coming deadlines in the time given the current disruption.
Over the weekend several governments including in the UK and across the EU predicted that mass quarantines and lockdowns of businesses could stay in place for several more months, raising further questions about the viability of all regulatory deadlines in the short and medium term.
On the prospect of further delays, Hill says: “We [ICMA] will continue to work closely with our members and the cross-border industry to monitor preparedness for regulatory implementation and ensuring that the authorities are fully aware of the practical challenges being created by the pandemic.”
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