Central Securities Depositories Regulation (CSDR) & Settlement Discipline Regime (SDR) – are you ready?

SS - Central Securities Depositories Regulation (CSDR) & Settlement

The implementation of the Central Securities Depositories Regulation’s (CSDR) settlement discipline regime (SDR) was delayed until 1 February 2022. SDR affects all market participants. Settlement efficiency will be key to meet the requirements of SDR.

Central Securities Depositories Regulation (CSDR) is European regulation No 909/2014 and aims to improve securities settlement in the European Union (EU) and within its central securities depositories (CSDs). It applies to all CSDs domiciled in the EU, along with those of Iceland, Liechtenstein and Norway (as incorporated in the European Economic Treaty). Switzerland is subject to certain CSDR provisions via a bilateral agreement.

CSDR has many implications for our clients. These can be broadly categorised as resulting from extended CSD requirements, internalised settlement reporting and the settlement discipline regime.

Settlement Discipline Regime (SDR)

SDR harmonises aspects of the settlement cycle and introduces new rules for cash penalties and buy-ins. Trading parties, central counterparties (CCPs) and trading venues will also be impacted and will have to directly comply with all measures relating to cash penalties for settlement failures and mandatory buy-ins.

Settlement efficiency is key to meet the requirements of SDR. In adapting to the SDR, we are enhancing our management of settlement instructions to include all the information required by CSDs. We are also implementing reporting for the new penalty and buy-in regime requirements (MT537PENA, MT530 for buy-in results). These enhancements will be available via SWIFT and NeoLink (our web portal) in the second quarter of 2021.

To help our clients prepare for the implementation of SDR, we have created a series of handbooks and toolkits to explain the changes and provide guidelines on settlement instructions. Our first toolkit provides details of the new messages for T2S markets accessed via our local custody product. Additional toolkits for global custody clients will be published in due course.