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Buy-ins binned

We have posted extensively on the multiple delays to the CSDR’s Settlement Discipline Regime
(SDR). By way of reminder the SDR was initially to comprise three core elements:

  • Enhanced trade reporting to facilitate trade settlement,
  • Incentivising timely settlement by the imposition of cash penalties, and
  • A Mandatory buy-in regime for failed trades.

Reporting and cash penalties came into force on the 1 February 2022, but the buy-in regime was
subject to indefinite review. On the 2 June, ESMA published a report containing an RTS that will
delay the buy-in regime for 3 years following its application. The official reason for the latest
suspension is “to allow the European Commission and the co-legislators additional time to
determine the best way forward to improve settlement efficiency while avoiding potential
duplicative implementation costs for market participants in case extensive changes would be made
to the existing buy-in measures”. The shorter reasons are that the buy-in regime in its proposed
form is unworkable and would likely result in severe liquidity migration. ESMA asks the NCA’s to
keep not supervising this specific area until formal suspension applies.

The RTS will be endorsed by the Commission and not objected to by the Parliament and Council in due course. Given that the full range of SDR was scheduled to apply from 13 September 2020, three years represents a long opportunity for the industry to keep making representations and for the elapse of time to save face over the likely funeral of a failed flagship policy.

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