Responding to today’s proposed changes from the European Commission to the Central Securities Depositories Regulation (CSDR), Pete Tomlinson, Director of Post Trade at the Association for Financial Markets in Europe, said:
“AFME members continue to support the objective of improving settlement efficiency in European capital markets in a proportionate and effective manner. AFME therefore welcomes today’s decision from the Commission to avoid immediately introducing mandatory buy-ins.
“In particular, the proposed two-step approach is practical as it will provide the opportunity to assess the impact of the penalties regime and other measures. AFME remains confident this will result in a reduction in settlement fails. The proposal to clarify and simplify passporting rules is also helpful and we hope this will support increased cross-border issuance and promote further competition amongst CSDs.
“However, it is not clear from today’s proposals how the Commission intends to assess whether or not settlement efficiency has reached ‘appropriate levels’. AFME recommends that a clear framework is established to measure this to provide greater certainty to market participants.
“AFME does not believe mandatory buy-ins are appropriate for any asset class or transaction type and will have disproportionate negative consequences on market liquidity and efficiency that could undermine the attractiveness and competitiveness of EU capital markets.
“Other tools may be more effective at achieving the settlement efficiency objective and should be considered as a second step, should this be necessary, instead of mandatory buy-in provisions. These could include increasing penalty rates or measures to increase use of partial settlement.”