The CSDR (Central Securities Depositories Regulation) Settlement discipline regime introduces new measures for the authorisation and supervision of EU Central Security Depositories (CSDs) and sets out to create a common set of standards at a European level.It will entry in force the 01st February 2022.
The Central Securities Depositories Regulation (CSDR), which was originally introduced in 2014 along with MiFID II and EMIR, aims to increase the safety and efficiency of securities settlement and the settlement infrastructures in the EU. On 1 February 2022, CSDR will introduce a new Settlement Discipline Regime (SDR) to provide a set of common requirements for central security depositories (CSDs) operating securities settlement systems across the EU, further harmonize certain aspects of the settlement cycle and mitigate settlement risks.
SDR introduces the following in respect of in-scope instruments (such as equity and fixed income securities):
- a new daily penalty mechanism for settlement fails, which will serve as a deterrent for participants and their clients that cause settlement fails;
- certain requirements for settlement information to be exchanged between parties within certain deadlines, and for contractual arrangements to be put in place in respect of this
- a mandatory buy-in mechanism for failed settlements lasting longer than certain specified periods. Note, however, that entry into force of this mechanism is expected to be postponed and guidance has been issued by ESMA to the effect that it should not be enforced prior to its postponement.