EU Consultation on Draft Guidelines For Improving Settlement Efficiency

The European Securities and Markets Authority has opened a consultation on two sets of draft Guidelines under the Central Securities Depositaries Regulation. The first draft Guidelines are on settlement fails reporting by national regulators, and the second draft Guidelines concern standardized procedures and messaging protocols that investment firms must use to limit settlement fails. Feedback on each of the draft Guidelines should be submitted by February 20, 2019. ESMA aims to finalize both Guidelines by July 2019.

Draft Guidelines on Settlement Fails Reporting

The CSDR requires a CSD to report to its national regulator the number and details of settlement fails that occur in each of the settlement systems it operates. The reports must also set out the measures the CSD anticipates taking to improve settlement efficiency. The precise requirements are set out in Regulatory Technical Standards on settlement discipline (Commission Delegated Regulation (EU) 2018/1229). National regulators must provide ESMA with relevant information on settlement fails. The draft Guidelines cover how national regulators should share information with ESMA on settlement fails and also clarify the scope of a CSD's reporting obligation under the RTS relating to the data to be provided and the types of transactions and operations that should be included in a report.

Draft Guidelines on Standardized Procedures and Messaging Protocols

CSDR requires investment firms to take steps to limit settlement fails, including by ensuring that they have all the necessary transaction data on the day of the transaction. Investment firms must also have in place arrangements with their professional clients to ensure prompt communication of an allocation of securities to the transaction, confirmation of that allocation and confirmation of the acceptance or rejection of the terms in good time before the intended settlement date. The content of the messages and deadlines for sending them is contained in the RTS on settlement discipline. The draft Guidelines are on the settlement process and set out the standardized procedures and messaging protocols that investment firms and their professional clients should comply with to limit settlement fails.

ESMA states that each of the final Guidelines will apply from September 13, 2020, in line with the application date of the RTS on settlement discipline.

View the consultation paper on settlement fails reporting.

View the consultation on standardized procedures and messaging protocols.

View details of the RTS on settlement discipline.

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