ICMA’s members feel that the MBI regime would be extremely damaging for European capital market liquidity, efficiency, and stability, creating undue risks for market participants, in particular investors, and undermining the objectives of capital markets union
On behalf of its members, ICMA has submitted its response to the ESMA Survey on Topics for the CSDR Review. The ICMA response focuses on Article 7, Measures to address settlement
fails, and in particular the mandatory buy-in (MBI) provisions. ICMA’s
strong recommendation is ‘delay and review’. While
pursuing other measures to promote settlement efficiency, including
cash penalties, the authorities should undertake a rigorous impact
assessment, firstly to conclude whether a mandatory buy-in regime is
warranted, and secondly, to the extent that it is, to inform the design
of any framework.
- ICMA recommends that with respect to
Article 7 of CSDR, the implementation of the mandatory buy-in provisions
be suspended to allow for a rigorous market impact assessment. In the
meantime, the authorities should implement the other elements of the
Settlement Discipline regime, including cash penalties, as soon as
practicable to do so. The impacts of these measures should be monitored,
and their application recalibrated as appropriate.
- ICMA further recommends that the proposed impact assessment be used
firstly to conclude whether a mandatory buy-in regime is warranted, and
secondly, to the extent that it is, to inform the design of any
framework, noting that the current regime, as outlined in Article 7, is
not fit for purpose.
- ICMA remains supportive of all constructive initiatives to improve
settlement efficiency in Europe’s capital markets, whether regulatory or
market-driven. These initiatives should not create undue risks for
market participants, in particular investors, nor should they undermine
the objective of efficient and stable European capital markets that are
attractive for European and international investors and capital raisers.
The CSDR mandatory buy-in framework threatens to do precisely this.
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