CSDR implementation at VP Securities
The EU is in the process of harmonising the financial markets and the underlying infrastructure. The new Central Securities Depositories Regulation (CSDR) will affect both VP SECURITIES (VP) and the market participants in the coming years.
Central Securities Depositories (CSDs) performed well during the financial crisis in 2007-2008 and today they are regulated under domestic law and international standards. However, the crisis made it clear that there is a need for harmonised European regulation of the financial markets and infrastructure.
CSDR regulates CSDs and the settlement market. This requires many participants in the financial markets to revise their systems in accordance with CSDR.
In short, together with TARGET2-Securities (T2S), the joint European platform for settlement of securities, CSDR will play a vital role in establishing a harmonised European settlement market structure and will increase the competition among CSDs. Banks will be free to choose their optimal service partner and optimise back-office procedures and services.
The harmonised rules for settlement in Europe include a penalty mechanism for settlement fails, which will serve as an effective deterrent for participants that cause settlement fails. As an example, cash penalties will be calculated on a daily basis for each business day that a transaction fails to be settled.
CSDs and their participants are currently eager to receive the necessary information in order to update their systems to comply with CSDR.
Everybody is waiting for Level 2
The implementation process is gearing up and the final CSDR guidelines and standards are expected later in 2016. VP is following the regulatory process closely and will inform our participants of relevant updates.
The European Securities Market regulator, ESMA, has proposed its draft Regulatory Technical Standards (Level 2), which supplement CSDR and are currently subject to review by the European Commission. The decision-making process for approval of the Level 2 standards is currently behind schedule and VP now expects the process to be finalised by the end of 2016 or early in 2017.
“VP have a constructive dialogue with the relevant regulators. We are moving forward as planned regarding compliance with CSDR and we will arrange a number of CSDR workshops similar to the one held in June for our clients,” says General Counsel Mogens Kruse.
The CSDR workshop in June was the kick-off for a dedicated VP CSDR working group in which a number of market participants are sharing knowledge and information as we move forward towards compliance with CSDR. Here at VP, we follow every aspect of the process and we will keep all of our participants updated on regulatory topics.