ICMA’s response focuses exclusively on the section relating to Settlement Discipline, in particular the provisions relating to mandatory buy-ins, which ICMA points out is market regulation, not post-trade regulation.
In its
response ICMA provides data and analysis to illustrate the expected
impacts of the mandatory buy-in regime on EU bond market pricing and
liquidity, and the costs that will be incurred by investors and
potentially issuers. The response also seeks to evidence the procyclical
and destabilizing effects the regime would have had during the
March-April 2020 COVID-19 market turmoil.
As well as noting
extensive cross-industry work to improve settlement efficiency in the
EU, ICMA recommends that the CSDR cash penalty mechanism be implemented
as soon as practicable, and that the regulatory authorities monitor its
impact on both settlement efficiency rates and market liquidity over an
appropriate time period, then recalibrate as required. During this time,
mandatory buy-ins should not be implemented. Requiring investment firms
to have in place contractual arrangements to remedy settlement fails
(such as those that already exist in the international bond and SFT
markets), could be an effective alternative consideration.
response
ICMA
© ICMA
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