ESMA Postpones CSDR’s Settlement Discipline Regime

The regime was initially due to come into force from September 2020 before it was deferred to February 2021. The new effective date is 1 February 2022.

ESMA (European Securities and Markets Authority) has formally postponed the introduction of the CSDR (Central Securities Depositories Regulation) settlement discipline regime until 1 February 2022.

“This postponement is due to the impact of the Covid-19 pandemic on the implementation of regulatory projects and IT deliveries by Central Securities Depositaries [CSDs] and a wide range of market participants and follows a request from the European Commission,” ESMA said in a statement.

The settlement discipline regime was designed to harmonise settlement standards across the EU. It covers measures to prevent and address trade settlement fails including rules for the trade allocation and confirmation process; cash penalties on failed transactions; mandatory buy-ins; and monitoring and reporting settlement fails.

The regime was initially due to come into force from 13 September 2020 before it was deferred to 1 February 2021. In July, ESMA had signalled it was working on a proposal to further delay the introduction of the CSDR until 1 February 2022.

ESMA’s final report on the draft regulatory technical standards (RTS) for the regime definitively postponing its introduction is available here.

According to the report, it would be “extremely difficult” for CSDs, their participants, and other financial market infrastructures to comply with the requirements of the RTS on settlement discipline by 1 February 2021.