Julian Eyre | published on 3rd October 2018
CSDR an opportunity with a sting in its tail
Simon Davies writes – CSDR affects a broad range of asset classes involved in trading securities, collateral management, securities lending and repo
TFE CSDR impacts analysis
There is an opportunity for market participants to access harmonised, automated, continuous real-time matching and cash settlement instructions within the EU, with CSDs providing enhancements to their services and the information they provided.
It will raise the bar in the industry to help firms manage settlements, improve fail rates and ultimately reduce risk.
However, there is a sting in the form of punitive measures the regulation introduces. With cash penalties for fails – to be passed to the affected party, mandatory buy-ins, contract changes and for significant offenders – the potential discontinuation of access to CSD services.
Along with the management of penalties for firms and buy-in processes the regulation also introduces several other requirements, such as; mandatory partial settlement, hold instructions, status updates across the settlement chain, best execution provisions, clearing impacts, liquidity provisions, approval for buy-in participation (where the failing participant is involved), affirmation / confirmation requirements and controls. To add to the complexity, all this is linked to the asset type and liquidity of the financial instrument involved.
The regulation requires firms to overhaul their processes, technology and controls and our assessment sees major impacts on settlement and front office processes across multiple business lines. The Field Effect can help firms with their CSDR implementation to take advantages of the opportunities and manage the impacts.
For further information talk to us at The Field Effect.