CSDR, Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (CSDR) was published in the Official Journal on 28 August 2014 and is gradually entering into force.
CSDR plays a key role for post-trade harmonisation efforts in Europe, providing a set of measures to prevent and address failures in the settlement of securities transactions (settlement fails) commonly referred to as the settlement discipline Regime (SDR). There are various financial market infrastructures affected by the CSDR requirements in addition to CSDs including CCP’s and trading venues.
CSDR applies to all EU CSDs and to all market operators in the context of securities settlement. Trading parties, central counterparties (CCPs), clearing and settlement agents (which are members of the CCPs and CSDs) and trading venues will also be impacted and will have to directly comply with some of the measures, in particular the introduction of mandatory buy-in regime and cash penalties for settlement failures.
The aim of CSDR is to harmonise certain aspects of the settlement cycle and settlement discipline and to provide a set of common requirements for CSDs operating securities settlement systems across the EU.
The CSDR rules on the settlement discipline regime introduce a number of measures to prevent settlement fails by ensuring that all transaction details are provided to facilitate settlement, as well as further incentivising timely settlement by cash penalty fines and buy-ins. CSDs will be required to provide functionality to participants to ensure harmonisation and automation of settlement processes across all European Economic Area markets to improve settlement efficiency.
EuroCCP has produced the following CSDR Settlement Discipline Framework to inform our clients on a regular basis of both the current and latest updates on the upcoming CSDR initiative.
The below DFF (Daily Fail fee File for CSDR) and MFF (Monthly Fail fee File for CSDR) specifications provide information for Clearing Participants regarding the Fail fines reported by CSDs due to the Settlement Discipline regime as defined by CSDR for the collection and redistribution of penalties.
The collection and distribution of SDR penalties will be achieved via direct debit and direct credit. This will be mandatory for all clients.
Should you have any questions please do not hesitate to contact a member of the Relationship Management team here.
Collection and distribution of penalties
EuroCCP will use Direct Debit and Direct Credit payments for the collection and redistribution of penalties to clearing members. This monthly process is very similar to the process at the CSDs. As EuroCCP is active across many CSDs, EuroCCP will net penalties at currency level across CSDs, which reduces the number of penalty payments.
Direct Debit arrangements will be required in the local currencies EUR, SEK, DKK and NOK. Multi-currency settlements in Euroclear and Clearstream are reported and charged in Euro.