Global security settlement markets are undergoing significant changes as they look to streamline and optimise markets. This, of course, brings challenges. Funds Europe and RBC Investor & Treasury Services recently conducted a survey of over 100 market participants, with results suggesting the need for core technology upgrades across the industry to manage this change. Written by Madeleine Saghir.
Since the 2008 global financial crisis, a swathe of new regulation – the European Market Infrastructure Regulation (EMIR) and the Markets in Financial Instruments Directive (MiFID II), to name two – has come into effect with the aim of creating a more transparent market, driving market efficiencies and lowering market risk.
The Central Securities Depositories Regulation (CSDR) penalty regime is the EU’s latest push.
CSDR’s Settlement Discipline Regime (SDR) requires European CSDs to automatically apply penalties against participants that fail to complete transactions on contractual settlement date. Asset managers, asset owners, service providers, investment banks and brokers are among those impacted.
Funds Europe and RBC Investor & Treasury Services (RBC I&TS) recently surveyed market participants on the buy and sell sides about CSDR readiness and the impact of the new regulation. We are pleased to present the survey results.
The new regime
Originally scheduled to go live in September 2020, the implementation of SDR suffered numerous delays – an acknowledgement by EU regulators that the new regulation was not in its optimal form and that extra time was needed to reopen the CSDR rulebook amid the disruption of Covid-19.
While the new regime finally went live on February 1 this year, initial reaction indicates that the market has a way to go before realising the desired results of more efficient European markets. Several teething problems have become apparent over the months following launch with many on the buy side incurring more fines than their pre-launch analysis had anticipated. Nevertheless, over the medium to long term, the opportunities to eliminate inefficiencies and risks are expected to become evident as the regulation continues to drive greater settlement certainty.