10 July 2020

ICMA submits response to ESMA Survey on Topics for the CSDR Review

ICMA’s members feel that the MBI regime would be extremely damaging for European capital market liquidity, efficiency, and stability, creating undue risks for market participants, in particular investors, and undermining the objectives of capital markets union

On behalf of its members, ICMA has submitted its response to the ESMA Survey on Topics for the CSDR Review. The ICMA response focuses on Article 7, Measures to address settlement fails, and in particular the mandatory buy-in (MBI) provisions. ICMA’s strong recommendation is ‘delay and review’. While pursuing other measures to promote settlement efficiency, including cash penalties, the authorities should undertake a rigorous impact assessment, firstly to conclude whether a mandatory buy-in regime is warranted, and secondly, to the extent that it is, to inform the design of any framework.

• ICMA recommends that with respect to Article 7 of CSDR, the implementation of the mandatory buy-in provisions be suspended to allow for a rigorous market impact assessment. In the meantime, the authorities should implement the other elements of the Settlement Discipline regime, including cash penalties, as soon as practicable to do so. The impacts of these measures should be monitored, and their application recalibrated as appropriate.
• ICMA further recommends that the proposed impact assessment be used firstly to conclude whether a mandatory buy-in regime is warranted, and secondly, to the extent that it is, to inform the design of any framework, noting  that the current regime, as outlined in Article 7, is not fit for purpose.
• ICMA remains supportive of all constructive initiatives to improve settlement efficiency in Europe’s capital markets, whether regulatory or market-driven. These initiatives should not create undue risks for market participants, in particular investors, nor should they undermine the objective of efficient and stable European capital markets that are attractive for European and international investors and capital raisers. The CSDR mandatory buy-in framework threatens to do precisely this.

© ICMA