Mandatory buy-ins not applicable
SDR[1] includes three main measures aimed to solve settlement fails: monitoring of settlement fails and their reporting to the supervisory authorities, cash penalties for settlement fails and mandatory buy-in.
Whereas the first two measures are applicable since 1 February 2022, the mandatory buy-in was, based on discussion with market participants and their concerns over the negative impact to the market, suspended and is not applicable.
Different application dates for measures
The formal regulation on non-use of mandatory buy-ins was put in force through adopted Regulation (EU) 2022/858 of the European Parliament and of the Council (regulation on pilot DLT regime). This regulation, in article 17 amended the CSDR with effect from 22 June 2022. This amendment stipulates that each of the settlement discipline measure shall apply from the date of application specified for each measure in the SDR. The aim of this change is to enable to separate application dates of each measure to address the settlement fails.
Postponing the mandatory buy-ins
In this regard the ESMA consequently submitted proposal to amend the SDR so postponement of application of provisions on mandatory buy-is for three years is formally regulated. This postponement would provide the European Commission and co-legislators with sufficient time to identify the best method for settlement efficiency improvement and, at the same time, to avoid possible duplicate implementation costs for market participants in case of significant amendments in existing buy-ins regulation. Approved proposal of the SDR amendment published in the Official Journal of the EU, postponed the application date of mandatory buy-in to 2 November 2025, as suggested by ESMA.
[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.
Author: Peter Nagy
