ICMA responds to ESMA consultation on the scope of CSDR settlement discipline

09 September 2024

ICMA’s response covers both the secondary market angle as well as relevant aspects from a primary market perspective, incorporating feedback from ICMA’s CSDR-SD working group, as well as input from ICMA’s Primary Market Practices Committee (PMPC). In general, ICMA is supportive of ESMA’s proposals..

 ICMA has today submitted a response to ESMA’s consultation paper on Technical Advice on the Scope of CSDR Settlement Discipline. The consultation sought stakeholder views on two specific exemptions from settlement discipline measures that are set out in the CSDR Refit article 7(9) and which ESMA has been asked to further specify, namely i) settlement fails that are considered as not attributable to the participants in the transaction, and ii) operations that are not considered as trading.

ICMA’s response covers both the secondary market angle as well as relevant aspects from a primary market perspective, incorporating feedback from ICMA’s CSDR-SD working group, as well as input from ICMA’s Primary Market Practices Committee (PMPC). In general, ICMA is supportive of ESMA’s proposals in terms of the two exemptions and the applicable scenarios set out in the consultation paper. The response welcomes ESMA’s stated objective to keep exemptions from penalties relatively limited in line with the “immunisation principle”, ensuring that intermediaries in a fail chain are flat in terms of penalties due and received. In this respect, ICMA also highlights the important differences between penalties and mandatory buy-ins, which would require a distinct approach if they were ever to be implemented. From a primary market perspective, the response reiterates ICMA’s concerns with cash penalties in the primary market context suggesting a one-day grace period for all fails of transactions in a new bond due to settle on the issue date of that new bond.

 

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