Compliance Briefing — February 1, 2022
The Central Securities Depositories Regulation settlement discipline regime went live, introducing mandatory buy-ins, cash penalties, and fails reporting for EU securities markets.
Executive briefing: The Central Securities Depositories Regulation settlement discipline measures (Regulation (EU) 2018/1229) applied from 1 February 2022. Market participants must prevent and address settlement fails via cash penalties, standardized workflows, and—subject to future suspension decisions—mandatory buy-ins.
Key compliance checkpoints
- Cash penalties. Ensure systems calculate and pass on daily penalties for settlement fails based on instrument classification and reference prices.
- Buy-in process. Maintain procedures for initiating buy-ins after four business days (or seven for illiquid instruments) unless regulators suspend the requirement.
- Operational reporting. Deliver settlement fails statistics to trading venues, central securities depositories (CSDs), and competent authorities.
Operational priorities
- System integration. Connect order management, clearing, and custody platforms to CSD penalty reports and automate receivables/payables booking.
- Client outreach. Update broker-dealer agreements and client disclosures to reflect penalty pass-through mechanics.
- Exception management. Implement root-cause analysis workflows to reduce chronic fails and monitor third-party agent performance.
Enablement moves
- Build dashboards that track settlement efficiency KPIs by asset class, counterparty, and market.
- Align CSDR controls with U.S. T+1 and UK market initiatives to harmonise post-trade playbooks.
- Engage with industry utilities (AFME, ECSDA) to stay informed on penalty calibration changes and buy-in suspensions.
Sources
Zeph Tech helps trading and operations teams orchestrate penalty processing, buy-in governance, and settlement analytics to stay compliant with CSDR.