European Commission postpones the entry into force of CSDR settlement discipline measures 

Europe

The Commission Delegated Regulation on settlement discipline (the “Settlement Discipline RTS”[1]) will now come into force on 1 February 2021 following industry requests for more time for implementation.  Central securities depositaries, trade venues and investment firms were originally due to apply its provisions by 13 September 2020.

Background

In its final report published on 4 February 2020 (the “ESMA Report”), ESMA suggested a postponement of the Settlement Discipline RTS in light of industry requests for more time to better deal with the complexities of implementing the necessary infrastructure and relevant settlement discipline measures. For further details, please refer to our previous article on the ESMA Report.

Amending Delegated Regulation

In response, the European Commission has now adopted a Delegated Regulation (the “Amending Delegated Regulation [2]) delaying the application of the Settlement Discipline RTS until 1 February 2021. In the Amending Delegated Regulation, the European Commission mentions the T2S penalty mechanism that is expected to go into operation during the weekend of 21-22 November 2020, the SWIFT ISO standards’ annual release for 2020 and the significant changes to current market practices, contractual arrangements and major IT developments required under the mandatory buy-in process.

The European Commission notes that postponing the application of the Settlement Discipline RTS is necessary to take account of these and other developments “which could not be envisaged at the time of adoption” and to allow “the appropriate IT adjustments to be made in a timely manner”. The European Commission says that a delay of the Settlement Discipline RTS is therefore appropriate and will benefit central securities depositaries, market participants and authorities more generally.

Next Steps

The Amending Delegated Regulation is expected to enter into force in June shortly after the one month objection period, with the Settlement Discipline RTS entering into force on the 1 February 2021.

Article co-authored by Oliver Bridal.



[1] Commission Delegated Regulation (EU) 2018/1229 of 25 May 2018 supplementing regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on settlement discipline.

[2] Commission Delegated Regulation (EU) amending Delegated Regulation (EU) 2018/1229 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on settlement discipline.