Alliance of 14 trade body call for CSDR buy-in delay
12 March 2021 UK
Image: Sergey_Nivens/adobe.stock.com
The global financial industry will be hard-pressed to amend internal processes to comply with “essential” changes to the Central Securities Depositories Regulation(CSDR) settlement discipline regime in time for the February 2022 deadline, according to a letter to EU regulators co-signed by 14 trade associations.
The mass lobbying effort, which includes the International Securities Lending Association, the International Capital Market Association and the International Swaps and Derivatives Association, is calling for the buy-in rules at the centre of the market’s long-standing concerns to be held back from implementation schedule until it’s fit for purpose.
“The implementation of the CSDR mandatory buy-in regime is a significant undertaking for the entire financial market, not only in Europe, but globally,” the letter reads. “This involves not only extensive system developments, but also major client outreach across multiple markets and jurisdictions to undertake contractual papering and remediation in line with the requirements set out in Article 25 of CSDR.”
The trade bodies note that a review of stakeholders' responses to the recently completed market consultation on the settlement discipline regime is not expected until Q2 at the earliest. Therefore, changes to the rules inspired by the market feedback will only be made public a few months before the regulation comes into force.
With the February 2022 deadline fast approaching, market participants will be undertaking a “major implementation exercise without any indication of the scope or timing of the review process”.
“At best, this will result in ongoing implementation efforts and investment being rendered redundant; at worst, it will mean repeating the exercise. Creating such uncertainty around a regulatory implementation project of this profile and scale is damaging to the development and reputation of the EU’s financial markets,” the letter continues.
As such, the group is requesting that EU rule makers finalise the “essential” revisions to the buy-in rules before setting out a timeline for implementation.
Other signatories include: AFME, AGC, ASSOSIM, EACB, EAPB, EBF, EDMA, EFAMA, EVIA, FIA, FIA EPTA, ICI Global, which together with ISDA, ICMA and ISLA represent a whole swath of capital market participants.
The letter adds to the regular drumbeat of calls for amendments to the CSDR buy-in rules that has maintained a steady tempo for several years.
The European Commission has repeatedly delayed implementing the rules but has so far resisted lobby efforts to enact actual changes in part because the settlement discipline regime is baked into the level one text and therefore any changes require a major legislative effort.
However, industry stakeholders are quietly confident cracks are appearing in the commission’s resolve. For example, the fact the scope of the scheduled review of CSDR was expanded to include the settlement discipline regime prior to implementation was widely seen to demonstrate that calls for change were no longer falling on deaf ears.
Elsewhere, the UK was publicly critical of the settlement discipline regime and chose not to on-shore it as part of the Brexit transition period, in a move which fanned the flames of discontent among market participants.
The mass lobbying effort, which includes the International Securities Lending Association, the International Capital Market Association and the International Swaps and Derivatives Association, is calling for the buy-in rules at the centre of the market’s long-standing concerns to be held back from implementation schedule until it’s fit for purpose.
“The implementation of the CSDR mandatory buy-in regime is a significant undertaking for the entire financial market, not only in Europe, but globally,” the letter reads. “This involves not only extensive system developments, but also major client outreach across multiple markets and jurisdictions to undertake contractual papering and remediation in line with the requirements set out in Article 25 of CSDR.”
The trade bodies note that a review of stakeholders' responses to the recently completed market consultation on the settlement discipline regime is not expected until Q2 at the earliest. Therefore, changes to the rules inspired by the market feedback will only be made public a few months before the regulation comes into force.
With the February 2022 deadline fast approaching, market participants will be undertaking a “major implementation exercise without any indication of the scope or timing of the review process”.
“At best, this will result in ongoing implementation efforts and investment being rendered redundant; at worst, it will mean repeating the exercise. Creating such uncertainty around a regulatory implementation project of this profile and scale is damaging to the development and reputation of the EU’s financial markets,” the letter continues.
As such, the group is requesting that EU rule makers finalise the “essential” revisions to the buy-in rules before setting out a timeline for implementation.
Other signatories include: AFME, AGC, ASSOSIM, EACB, EAPB, EBF, EDMA, EFAMA, EVIA, FIA, FIA EPTA, ICI Global, which together with ISDA, ICMA and ISLA represent a whole swath of capital market participants.
The letter adds to the regular drumbeat of calls for amendments to the CSDR buy-in rules that has maintained a steady tempo for several years.
The European Commission has repeatedly delayed implementing the rules but has so far resisted lobby efforts to enact actual changes in part because the settlement discipline regime is baked into the level one text and therefore any changes require a major legislative effort.
However, industry stakeholders are quietly confident cracks are appearing in the commission’s resolve. For example, the fact the scope of the scheduled review of CSDR was expanded to include the settlement discipline regime prior to implementation was widely seen to demonstrate that calls for change were no longer falling on deaf ears.
Elsewhere, the UK was publicly critical of the settlement discipline regime and chose not to on-shore it as part of the Brexit transition period, in a move which fanned the flames of discontent among market participants.
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