The European Commission proposed five changes to the CDSR earlier this week including improving the passporting regime; cooperation between supervisory authorities; banking-type ancillary services; the oversight of third-country Central Securities Depositories; and settlement discipline.

In a statement, AFME’s director of post-trade, Peter Tomlinson, praised the “practical” two-step approach set out in the proposals put forward on 16 March, however, said that they are currently unclear on how the European Commission intends to assess whether firms have reached the “appropriate level” of settlement efficiency.

Instead, he has recommended that a clearer framework be established to measure this to ensure certainty for market participants.

Elsewhere, Tomlinson warned against the “disproportionate negative consequences on market liquidity and efficiency” that mandatory buy-ins could have on the attractiveness and competitiveness of capital markets in the Bloc.

Mandatory buy-ins were successfully delayed in November after significant lobbying from the industry with many participants claiming they would damage competition by discouraging brokers from making markets.

Included in the lobbying was the European Securities and Markets Authority (ESMA) which sent a letter to the European Commission urging them to delay in September last year. Although lobbyists eventually achieved their goal, the delay fell short of market participants and numerous trade associations’ hopes to scale back the rules entirely.

AFME’s Tomlinson voiced his support for the Commission’s decision to delay the implementation of buy-ins, however, reiterated that he did not believe they were appropriate for any asset class or instrument type at any stage.

“Other tools may be more effective at achieving the settlement efficiency objective and should be considered as a second step, should this be necessary, instead of mandatory buy-in provisions. These could include increasing penalty rates or measures to increase use of partial settlement,” he said.

The post AFME warns against ‘unclear’ measurement framework laid out in CSDR proposals appeared first on The TRADE.

Interest in clearing OTC FX, and more specifically, non-deliverable forwards (NDFs) is on the rise, as institutional asset managers seek to reduce the amount of margin they need to post under phase six of the uncleared margin rules (UMR) later this year (September).

As institutional asset managers continue their preparation ahead of the final phase, a more evolutionary, rather than revolutionary, approach is required. FX is, after all, a by-product for the real-money asset management community. As opposed to trading currency markets for alpha, the vast majority of money managers are looking to manage risk around their currency exposures. 

When it comes to NDF trading specifically, this currently only accounts for around 4% of the total FX trading, according to Bank of international Settlements data. While it may seem to be a marginal activity for many market participants, the percentage is only going to rise as the clock ticks down to UMR phase six. The gradual phase-in of the rules, which, under phase 6, will apply to firms with average aggregate notional amounts (AANA) of $8 billion or more will require these firms to post initial margins for certain uncleared derivatives. This lower threshold has certainly incentivised greater central clearing of NDFs for real money asset managers. 

The challenge is that, for too long, a lack of liquidity, and therefore pricing transparency, has been an issue for asset managers when using NDFs, making them one of the most expensive FX trades. At the same time, very few firms are in a position or have the desire to rip and replace their existing FX trading systems just to solve this predicament. Instead, it makes more sense for asset managers who fall under UMR rules to adopt best in class, existing vendor solutions which not only electronifiy their NDF prices but can help seamlessly clear these trades as well. That way, they will have the distinct advantage in being able to benefit from a much tighter spread due to better liquidity. 

The electronification of streamed pricing also provides the immediate benefit of being able to determine the best method of execution—from how much it will cost to trade a specific amount at a given point in the day, to which liquidity provider is offering the best pricing at that time, to which tenor(s) offer the tightest spreads. These pre-trade decisions help facilitate greater automation that, in turn, reduce operational risk, which can have a significant impact on the potential to achieve provable best execution. In addition, this electronic pricing also needs to be supported by a strong trading system that can process a more complex NDF trade and not just simple spot transactions. That includes features such as staging incoming orders pre-trade and straight through processing (STP) after the trade. 

With the FX market boasting turnover of $8.7 trillion a day, even a trajectory to just 10% of that total would be a substantial increase in NDF volume. Future entrants to NDF electronification may discover that late is too late. The more nimble and sophisticated firms that have already embedded electronification of NDFs into existing systems are likely to be the ones to prosper. As NDFs continue the transition from a decentralised, bilateral microstructure to one characterised by centralised trading, disclosure and clearing, dealing with the specific pain point of electronifying NDFs will be a big step towards complying with UMR when it comes into force. 

The post UMR: Why real money managers require a FX tech evolution, not revolution appeared first on The TRADE.

The saga has rumbled on for years now, with trade associations sending countless appeals to regulators to delay or amend the buy-in rule which they believe could lead to increased costs, reduced liquidity and reduced returns for investors. 

A trilogue – an informal tripartite meeting between the European Council, Commission and Parliament to reach provisional agreement on legislative files – took place earlier this week. But sources told The TRADE’s sister publication Global Custodian, that there was “no significant progress on a potential SDR buy-in delay”.

They added there is a “fear the delay won’t be in place before the implementation date in February 2022”, while another source added: “There’s some degree of panic out there from the regulatory working groups” around the timeline of a potential delay.

The European Securities and Markets Authority (ESMA) wrote to the European Commission (EC) urging it to consider a delay of the mandatory buy-in regime under the Settlement Discipline Regime (SDR) currently scheduled for 1 February 2022, pushing for a decision by the end of October.

The trilogue represented an opportunity for ESMA to get the green light to move forward and implement a delay, but initial reports do not sound positive.

The only hope is that the Commission could decide to act on ESMA’s request for a delay, through legislation in the DLT Pilot Regime, which is in the final stages of negotiations. Others have suggested it could be shoehorned into the Digital Operational Resilience for Financial Services (DORA) regulation, due to the amount of time it will take to formally delay CSDR.

The most likely outcome is that legislation to delay the buy-ins may not be finalised until after 1 February 2022 – when the regulation is set to officially come into effect, or at least near enough to that date, which will not give participants enough time to prepare. If that is the case, ESMA said it is prepared to act to bridge the gap, possibly through a no-action relief letter or forbearance.

“The industry does not expect a Level 1 amendment to define new implementation dates; a Level 2 amendment would have the new date,” one expert said. Various trade associations have stressed the delay being included in Level 2 would need to be long enough to allow sufficient time for the buy-in rules to be amended, and the market to get ready for the amended rules.

The current timeline has the European Commission set to publish its legislative proposal by the end of the year.

In addition, sources explained that the reluctance appears to be the result of political dynamics rather than objection to the actual proposal.

“If there is political agreement that there needs to be a delay, then our attention will be on the Commission and ESMA for them to set out a roadmap that provides clarity to the market,” said one source close to the matter. “If there is no political agreement, then equally, the industry will be looking at the Commission and ESMA to come up with an alternative solution. It is difficult to see how it would now be possible for the industry to implement the current rules by the current deadline without massive disruption. “

ESMA is in favour of delaying the entry into force of the buy-in requirements while applying the other settlement discipline requirements, such as settlement fails reporting and cash penalties regime, as planned.

ESMA stated in its letter – sent on 24  September to the European Commission – that carrying on with the implementation of these two components as scheduled will positively contribute to improving settlement efficiency and the transparency around it in the EU.

The final EC legislative proposal for the review of CSDR is expected by the end of the year, which could possibly include changes to the buy-in regime.

In respect to the buy-in regime, ESMA noted two challenges in its letter to the Commission. One is the absence of clarity in respect to some open questions necessary for the implementation of the buy-in requirements.

The second challenge ESMA highlights is the lack of certainty regarding whether the EC’s legislative proposal will include changes to the mandatory buy-in rules and the extent of any of those possible amendments.

Market participants’ ability to implement the regime will be directly impacted by these challenges and they may face increased costs due to changing their systems and processes later to align with potential amendments of buy-in rules.

A letter from the Association of Financial Markets in Europe (AFME), the International Securities and Derivatives Association (ISDA), the International Securities Lending Association (ISLA) and the Investment Company Institute (ICI), among 10 others earlier this year noted: “A key concern for our respective members is that the current legislative timetable requires market participants to proceed with a major implementation exercise without any indication of the scope or timing of the review process – noting that some revisions to the mandatory buy-in regime are essential.

“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 post European regulators struggle to progress SDR buy-in delay as ‘degree of panic’ sets in across the industry appeared first on The TRADE.

In a report on CSDR, the European Commission acknowledged industry feedback that the Settlement Discipline Regime (SDR) – specifically the rules around mandatory buy-ins – could result in unintended consequences on costs and liquidity. 

“It is appropriate for the Commission to consider proposing certain amendments, subject to an impact assessment, to the settlement discipline framework, in particular the mandatory buy-ins, to make it more proportionate and avoid potential undesired consequences,” the Commission said in the report.

However, the Commission did outline that a few stakeholders were in favour of mandatory buy-ins, arguing that: voluntary buy-ins today do not incentivise the optimisation of back-office procedures that can also cause settlement fails; there will be significant hesitation to execute voluntary buy-ins against large market participants; and they have already made significant investments to comply with the framework.

Timings of any potential changes were not outlined and any legislative changes to the rules will not be published until the fourth quarter of this year. 

With just seven months to go until the go-live of SDR, market participants have grown increasingly worried that they will be unable to make the necessary changes to their operations to meet the rules under the current timeline. 

For asset managers and other buy-side firms that seek to use a broker, custodian or a third-party vendor to manage their CSDR compliance, time is running out to finalise their relationships and be ready for the go-live of the regulation. 

The report has been welcomed by trade bodies such the Association of Financial Markets in Europe (AFME), but it has urged regulators to take serious action to separate the buy-in regime with the other aspects of the regulation.

“It is helpful that the Commission has stated its intention to consider amendments to the mandatory buy-in regime, subject to an impact assessment. Given that amendments may now be made at a later date, it does not make sense for the current rules to be implemented and enforced on 1 February 2022,” said Pete Tomlinson, director of post-trade at AFME.

 “AFME strongly recommends that the Commission and ESMA take action to decouple the implementation of the mandatory buy-in rules from all other aspects of the settlement discipline regime. This would allow other measures, such as the penalties regime, to take effect as planned in February 2022, but avoid implementation of the current buy-in rules, which have been widely acknowledged as being flawed.”

The post European Commission considers changes to CSDR penalty regime appeared first on The TRADE.

Early signs of the UK’s split from EU regulations came last year when the UK Treasury confirmed it would not implement the Settlement Discipline Regime (SDR), set out under the Central Securities Depository Regulation (CSDR). 

UK Ministers are now reportedly planning to overhaul MiFID II, the EU’s main financial services legislation, as it looks to hold onto its place as a global financial centre. Changes could include scrapping the share trading obligation, which forced more than €6 billion a day of EU-denominated stocks out of London to European-based venues mainly in Amsterdam. 

With the UK and EU to set out separate paths on financial regulation, there are various implications this could have on the post-trade landscape alongside potential unintended consequences that may arise for firms. 

A battle for clearing

The battle to win euro-denominated derivatives clearing activity, a business worth some $660 trillion, is one of the fiercest between UK and EU regulators. Currently, London is the home to derivatives clearing, with most of the activity going through LCH. Despite moves from Eurex, the Frankfurt-based exchange group, to lure activity from London, LCH has maintained its hold of the market. 

A temporary 18-month equivalence for UK clearing houses was enacted in September 2020, enabling LCH to continue providing euro-denominated clearing services from January 2021 until June 2022. 

However, tensions are heating up between regulators, and it appears equivalence will not be extended beyond 2022. In February, the Bank of England’s Andrew Bailey warned over a “serious escalation” in relations with the UK if Brussels attempts to force banks to move all clearing of euro-denominated derivatives from London to the Eurozone. 

In his speech to the UK Treasury Committee, Bailey highlighted how the consequence of no further equivalence decisions at the end of the 18-month period would mean that a quarter of euro-derivatives clearing would move from the UK to the EU. This 25% chunk of euro-derivatives clearing is not a “viable” amount for the EU to process, Bailey explained to MPs.

“The reason is, particularly in an activity like clearing where the efficiency really comes from having a very big pool of derivatives that can be netted and cleared down, by splitting that pool up the whole process becomes less efficient and having the smaller part of the pool would be even less efficient,” he said. “The clearinghouses also involve a certain level of cross-currency netting to go on and that would break down as well.”

To obtain the remaining three-quarters of total euro-denominated derivatives activity, Bailey said the EU could potentially “force or cajole banks and dealers to say there will be some other penalty unless you move this clearing activity into the EU”. 

This, he warned, would create “a very serious escalation of the issue” and was something that the UK should “resist very firmly”. Activity has not yet shifted from the UK, as banks await clarity on what is to come. 

“The situation is unclear on what will develop after June 2022, and we have clear messages from the Commission to move euro-denominated contracts/products to EU-located CCPs,” says Haroun Boucheta, head of regulatory affairs at BNP Paribas Securities Services. “The industry has pressure from the Commission to work closely on operational solutions to migrate euro business, using EU27 CCPs.”

Post-trade fragmentation

The lack of cross-border equivalence for not only clearing, but also settlement of securities, means clear lines have been drawn between UK and European post-trade venues. Banks are concerned about the impact of fragmentation on costs for clearing and settlement. 

The costs will come from investment firms and banks having to adapt their technology infrastructure to manage a dual post-trade framework. Larger-sized firms may be able to absorb these costs, but it will make barriers to entry for smaller-sized firms even harder to overcome. As a result, some asset managers could be forced to operate in just one jurisdiction.

“Firms have broadly adopted a model where you have one system, but you guide the trade processing to different venues, with localised processing funnels,” says Samir Pandiri, president at Broadridge International. “A very small second group are firms who basically decided they didn’t have the scale in either the UK or the Continent to make it worthwhile preparing to continue service in that jurisdiction.

“Post-trade solutions need to take into account three variables: trading in multiple geographies, clients in different jurisdictions and where the post-trade processing is actually done. We did a lot of one-off configuration with new client entities since 2016, and that’s all been working well. But the Brexit work is also enabling a broader re-set on post-trade, with providers needing much more flexible/customisable systems to keep competitive. 

“With trading volumes moving around between venues, post-trade services must now offer much more price flexibility and more variable cost, which will act as a further stimulus to mutualisation. The increased complexity also highlights the necessity of better data models, to spot inefficiencies, such the costs of a fail for example.”

Regulatory fragmentation

As outlined, the UK is seeking to overhaul certain European regulations to make itself a more attractive financial services centre. It could appear that the UK is taking a different approach to post-trade regulation, following its decision to not implement the SDR rules. It did, however, state it will consider the future approach of the rules to the UK’s own post-trade framework.

The danger here for firms is that regulatory fragmentation could require double the amount of work and resources to stay compliant in both jurisdictions. 

“With the UK opting out of CSDR, there will be separate regimes around settlement discipline,” highlights Reto Faber, head of direct custody and clearing for EMEA at Citi. “It may look to align with some aspects of CSDR, but right now it looks like there will be a dual system affecting cross-listed shares. This is going to bring additional and duplicated costs, as well as increased complexity to deal with multiple regimes.” 

That being said, the decision by the UK to implement CSDR differently could provide a glimmer of hope for banks and investment managers that the EU will review its contentious mandatory buy-in regime. 

“Fragmentation is going to come on a wider scale throughout the year. With the UK implementing SDR separately, the regulation may come back to the table very differently where they could make the buy-in optional rather than mandatory,” says Linda Gibson, head of regulatory change at BNY Mellon’s Pershing.

“But the market is waiting on how the UK will implement SDR, causing some operational challenges to firms that are international. Those that have project plans in place are working on the EU regime, so the challenge is to anticipate how different the UK will be.” 

The European Commission recently closed its consultation of CSDR and is set to publish the findings of its review in the second quarter. Many are hoping European regulators will do away with the buy-in regime (which seems highly unlikely) or implement it on a discretionary basis. 

As a result, European regulators could opt for more favourable changes so that it is more aligned with the UK.

“We have pushed for a voluntary buy-in regime rather than a mandatory one, and specific exemptions in terms of products and operations which should be out of the scope of the SDR,” says Boucheta. “The UK move not to implement the full CSDR rules will bring the attention from EU regulators, and it is a good thing to help us push our various points.” 

In addition, Broadridge’s Pandiri believes that regulators will eventually look to align their respective frameworks that can preserve the flow of securities processing and post-trade activities. 

“While it looks like regulatory fragmentation at present, I do see this as a ‘creation moment’ for things coming back together, as practical market innovation starts to produce more fungible solutions that actually make securities processing easier across markets,” Pandiri says.

Going forward, the UK and EU will most likely stay in close contact when formulating and implementing financial services regulation. The UK has been a leading voice for many of the post-financial crisis regulations, and it is hoped their expertise will continue to be leveraged. 

“The UK played a very important role in Brussels, and though it is no longer directly involved, it should carry on discussions for securities services regulations to avoid unintended consequences,” Boucheta concludes.

This article was featured in the Spring 2021 edition of The TRADE magazine.

The post Clearing post-Brexit: What happens now? appeared first on The TRADE.

Earlier this year, the Commission announced it would delay implementation of the Settlement Discipline Regime (SDR), a key aspect of the rules, to February 2022 after receiving a wave of industry pushback due to the operational strain the COVID-19 pandemic has had on regulatory preparedness.

“The fact that the Commission is consulting on the settlement discipline framework should be viewed positively as a means of addressing outstanding market concerns,” said Paul Baybutt, senior product manager for securities services at HSBC.

It is expected that the majority of industry bodies and market participants will most likely focus their feedback on the settlement penalties and the buy-in components of SDR, which many have frequently warned would have a negative impact on trading and liquidity in Europe’s capital markets.

Trade bodies including the Association for Financial Markets in Europe (AFME) and the International Capital Markets Association (ICMA) have called for buy-ins to be optional.

“Key themes, from the discussions we’ve had, are simplification and recalibration of the penalty eligibility and rates with a view to making these more specific to the different products but also more straightforward to calculate,” said Pardeep Cassells, head of financial products at AccessFintech. “From a buy-in perspective, we’re expecting to see a range of requests from different contributors looking for everything from removal of the buy-in regime altogether to extended mandatory buy-in windows to a more discretionary set up. The role of buy-in agents is also likely to be a hot topic.”

The spike in settlement failures in March and April at the height of the pandemic highlighted to the industry and to market regulators that fail rates can be significantly impacted during times of market stress.

Data from the European Securities and Markets Association (ESMA) also revealed failures in equities and government bonds doubled to 12% and 6% respectively in March, caused by operational rather than liquidity issues.

“The regulators will face pressure to soften or eliminate the buy-in regime to prevent a negative market impact in the event of future market stress/crises,” said Virginie O’Shea, founder of Firebrand Research.

“The EU is unlikely to want to remove both the settlement penalty regime and the buy-in regime, so the latter will probably face the most criticism because of its operational complexity in terms of implementation. If it had been in place in Q1/2, the cost to firms would have been significant this year.”

Some market participants are hoping for widescale changes to the SDR and have called for regulators to scrap the buy-in rules altogether. According to an audience poll conducted at the Network Forum Autumn Meeting, over a third said they wanted buy-ins to be removed, while nearly 40% said they expect the scope of the penalties and buy-ins to change. However, it is unlikely the Commission will adhere.

“We expect to see the spirit of the current draft of the regulation upheld, which means that we do not foresee either penalties or buy-ins disappearing from the SDR plans in their entirety,” added Cassells.

The post European Commission launches consultation to review CSDR and buy-in regime appeared first on The TRADE.

The Settlement Discipline Regime (SDR) is among the core components of the Central Securities Depository Regulation (CSDR), which lays out cash penalties and mandatory buy-ins for trades that have failed to settle.

The TRADE revealed earlier this month that European regulators were looking to push back the implementation date to February 2022, after a note distributed by Euroclear confirmed that authorities were in advanced discussing regarding a proposed one-year delay to the regulation.

ESMA stated the proposal to delay the rules is due to the impact of the COVID-19 pandemic on the implementation of regulatory projects and IT deliveries to CSDs, and came in response to a request from the European Commission.

In addition to the operational pressures the pandemic has forced on firms, the European Commission also noted that other market developments during the crisis would have been significantly worse in terms of market liquidity, especially in the non-cleared and repo markets, had the mandatory buy-in regime was in place.

“In the light of these representations about the impact of COVID-19, I would like to invite ESMA to consider whether a further postponement of the date of entry into force of the RTS on settlement discipline would be appropriate and, if it is, to present a proposal for amendment of the relevant RTS in this respect to the European Commission,” said John Berrigan, directorate general, Financial Stability, Financial Services and Capital Markets Union, European Commission, in a letter to ESMA.

ESMA stated it aims to publish the final report on further postponing the SDR by September, which will then be subject to endorsement by the European Commission and European Parliament.

The delay marks a victory for the financial services industry, where representative bodies have pressed regulators for months to delay the rules to 2022. Last month, the UK Treasury it would not implement the CSDR buy-in regime as it looks to continue to break away from EU-led legislation.

The post ESMA confirms plan to delay Settlement Discipline Regime to 2022 appeared first on The TRADE.

The move would mean pushing the implementation date back by a further year after the European Commission already granted an extension back from September 2020 to February 2021.

Approval of the delay would still take time given it would have to go through three stages of European governing-level rubber stamping via the Commission, Council and Parliament.  

A note, seen by The TRADE’s sister publication Global Custodian, was distributed by Euroclear at the end of last week with news of the potential delay, while other sources also confirmed the move at top European regulatory level.

In the note, Euroclear said it understands that discussions are “advanced”, regarding a proposed one year delay to the entry into force of the Settlement Discipline Regime. The post-trade services provider added that it expects that ESMA will publish an amendment proposing the delay, after the summer holiday period.

Talk of the move comes just one month after the UK said it would not roll out the rules following Brexit, which penalise settlement fails and enforce mandatory buy-ins. Meanwhile, industry associations have continued to lobby against the regulation which many believe will have significant unintended consequences for the market. 

While a delay would appease these groups somewhat, the buy-in regime remains one which the industry largely opposes to in its entirety. In a letter signed by over a dozen associations in January, the consortium asked for the practice to become discretionary, highlighting extreme concerns about the impact on market liquidity, operational processes, and ultimately, end investors if implemented in its current format. 

Within the requests was also a call for a deferral until the effects of penalties and other measures to promote settlement efficiency are implemented.  

The response to this letter all-but seemed to take any wholesale changes and a delay off the table, when the European Securities and Markets Authority (ESMA) rejected the calls for changes and delays to critical elements of rules, despite the urgency from the consortium of trade bodies. 

Within the letter , ESMA denied a postponement or an alteration to make buy-ins discretionary. “It is premature to consider further action at this point in time, in the absence of concrete evidence following the implementation of the buy-in requirements,” said ESMA, adding that the mandatory nature of the buy-in regime was a “clear policy choice by the co-legislators when adopting the CSDR” and is meant to protect the securities buyers. 

While ESMA already pushed the regulation back from September 2020 to February 2021, this was to help market participants transition to new ISO messaging protocols and the TARGET2 Securities (T2S) penalty mechanism, which focuses on the daily calculation and reporting of penalties for settlement fails, which are both set to be released in November 2020.

While this was already a controversial regulation for the capital markets, the global pandemic added to the growing list of problems participants were facing in preparing for the regulation. Subsequently, the European Central Securities Depository Association (ECSDA) also weighed in during June, asking the European Commission to reconsider delaying the buy-in regime to avoid a potential bottlenecking of post-trade IT projects for the industry caused by COVID-19. 

The post Regulators in ‘advanced talks’ to delay Settlement Discipline Regime to February 2022 appeared first on The TRADE.

Rishi Sunak, UK Chancellor of the Exchequer, said in a statement on the UK Treasury’s website that the rules will not be implemented as planned in February 2021 and UK firms should instead continue to apply the existing framework.

“It will therefore consider the future approach to the UK’s settlement discipline framework, given the importance of ensuring that regulation facilitates the settlement of market transactions in a timely manner while sustaining market liquidity and efficiency,” Sunak said. “Any future legislative changes will be developed through dialogue with the financial services industry, and sufficient time will be provided to prepare for the implementation of any new future regime.” 

The move means that traders in the UK will not have to comply with the buy-in regime, although UK-based firms will still have to adhere to the rules for all European transactions that are settled with European central securities depositories.

“The majority of capital markets firms operate globally, having footholds or transactions flowing through the EU, UK, US and APAC regions, and will therefore be pulled into CSDR,” Daniel Carpenter, head of regulation at Cognizant firm Meritsoft, commented on the development. “Specifically, there will be many UK-based investment managers who will be settling transactions across the EU and will need to make sure that they are compliant with this regulation.

“This regulation highlights that reducing the number of trade fails is best practice and commercially beneficial. As a result, improving processes will no doubt be looked at favourably by UK firms, even following yesterday’s statement.”

The decision not to adopt the rules could signify the UK’s intent to not adhere to EU legislation post-Brexit. In addition to the SDR, the UK said it will not enforce non-financial counterparties to comply with the reporting rules laid out in the Securities Financing Transactions Regulation (SFTR). In March, several industry experts told The TRADE that the UK may decide not to adopt the buy-in regime post-Brexit.

Europe’s securities watchdog recently denied a formal request from multiple industry groups to defer or amend the mandatory buy-in regime and phase-in the new rules for failed settled trades, after it was forced to postpone the rules from September 2020 to February 2021 amid intense lobbying from industry associations.

Buy-ins have typically been used at discretion as they can create unpredictable costs, and are used by market participants to manage settlement risk in the case of failed trades. Initiating a buy-in against a failing counterparty will become a legal obligation under the CSDR regime, with limited flexibility on timing to complete the process.

The rules around buy-ins under CSDR have proved controversial with many industry groups and associations which have warned the requirements would harm liquidity in bond markets and increase trading costs. The Investment Association and the International Capital Market Association’s Asset Management and Investors Council urged regulatory authorities in February to exclude cash bond markets and phase-in the implementation of the CSDR buy-in regime due to concerns around the regime’s potential impact on markets.

The post UK confirms it will not adopt CSDR buy-in regime appeared first on The TRADE.

Through the combination of Meritsoft’s FINBOS CSDR Manager and the Taskize Connect solutions, they will deliver a real-time platform for banks, brokers and buy-side firms to manage the settlement fail and buy-in process.

The new platform will also offer audit trail and fail-resolution workflow, an integrated solution with visibility into all settlement instructions and communications, and will help firms make improvements on identifying and preventing fails.

“With the February 2021 CSDR deadline front of mind for financial houses, market participants need to be able to mitigate the potential risks and costs of upcoming penalties and buy-ins under CSDR,” said Kerril Burke, CEO, Meritsoft. “They must do this through efficient issue resolution while providing business managers and traders with the information required to factor CSDR implications into their decisions. We are pleased to be collaborating and innovating with Taskize to offer market participants this enhanced platform.”

The partnership comes as firms scramble to prepare for the February 2021 go-live of the Settlement Discipline Regime (SDR). However, industry associations and trade bodies have warned many will not have the operational processes and technology in place to be ready to comply.

Speaking to The TRADE last month, head of regulation at Meritsoft, Daniel Carpenter, explained how the ongoing changes to CSDR will impact market participants and why so many in the industry are not satisfied with the current framework.  

The post Meritsoft and Taskize launch combined CSDR solution appeared first on The TRADE.