EXCLUSIVE: Pirum releases new CSDR fails cost analysis tool
27 February 2020 London
Image: Shutterstock
Pirum Systems has imbued its Central Securities Depositories Regulation (CSDR) toolkit with a new fails report and an enhanced standing settlement instruction (SSI) enrichment services.
The report for failed trades aims to enable clients to more accurately determine the regulation’s cost on their securities finance business that could come as a result of its settlement discipline regime ahead of its go-live.
CSDR’s settlement discipline regime, which includes mandatory buy-ins for failed trades, as well as cash penalties, is slated to come into force in February 2021.
However, many corners of the market are concerned that the rules in their current form risk heaping significant additional costs on those in scope.
Pirum’s own research shows that its clients could face fails fines of €80 million to €110 million per year, with an estimated fails management cost of €120 million and CSDR fines management costs of up to €85 million.
The total costs could be as much as €300 million per annum, Pirum says.
Estimates of the potential costs related to CSDR’s settlement discipline regime vary significantly but the current letter of the law, especially with regards to the mandatory buy-ins, has spooked the market.
Concerns reached fever-pitch earlier this year when 14 trade bodies sent a letter to the European Commission calling for delay as the original go-live date of September this year was predicted to cause a liquidity squeeze as participants fled the market to avoid potentially unlimited costs.
As a result, the European Securities and Markets Authority formally requested that the commission
grant a delay to the regime’s implementation until 1 February 2021.
Elsewhere, Pirum’s bolstered SSI enrichment services aim to allow firms to enrich and reconcile SSIs at the trade level, in order to prioritise and minimise fails due to mismatching settlement instructions.
According to Pirum, more than 35 firms are now using the service to enhance their trade files with over 100,000 SSIs and to get a real-time view of SSI instruction problems across all markets.
Robert Frost, head of product development and client services at Pirum Systems, says that the new features come in response to clients’ need to automate their processes to reduce costs and avoid falling foul of CSDR’s regime rules.
“Following feedback from our CSDR working group, we are introducing a new CSDR fails report that includes estimated CSDR cost – to enable firms to see what the impact is today, in order to remediate their processes ahead of the go-live date,” he says.
Frost adds that Pirum is also working with clients to develop new solutions to assist with fails prevention for all markets.
The report for failed trades aims to enable clients to more accurately determine the regulation’s cost on their securities finance business that could come as a result of its settlement discipline regime ahead of its go-live.
CSDR’s settlement discipline regime, which includes mandatory buy-ins for failed trades, as well as cash penalties, is slated to come into force in February 2021.
However, many corners of the market are concerned that the rules in their current form risk heaping significant additional costs on those in scope.
Pirum’s own research shows that its clients could face fails fines of €80 million to €110 million per year, with an estimated fails management cost of €120 million and CSDR fines management costs of up to €85 million.
The total costs could be as much as €300 million per annum, Pirum says.
Estimates of the potential costs related to CSDR’s settlement discipline regime vary significantly but the current letter of the law, especially with regards to the mandatory buy-ins, has spooked the market.
Concerns reached fever-pitch earlier this year when 14 trade bodies sent a letter to the European Commission calling for delay as the original go-live date of September this year was predicted to cause a liquidity squeeze as participants fled the market to avoid potentially unlimited costs.
As a result, the European Securities and Markets Authority formally requested that the commission
grant a delay to the regime’s implementation until 1 February 2021.
Elsewhere, Pirum’s bolstered SSI enrichment services aim to allow firms to enrich and reconcile SSIs at the trade level, in order to prioritise and minimise fails due to mismatching settlement instructions.
According to Pirum, more than 35 firms are now using the service to enhance their trade files with over 100,000 SSIs and to get a real-time view of SSI instruction problems across all markets.
Robert Frost, head of product development and client services at Pirum Systems, says that the new features come in response to clients’ need to automate their processes to reduce costs and avoid falling foul of CSDR’s regime rules.
“Following feedback from our CSDR working group, we are introducing a new CSDR fails report that includes estimated CSDR cost – to enable firms to see what the impact is today, in order to remediate their processes ahead of the go-live date,” he says.
Frost adds that Pirum is also working with clients to develop new solutions to assist with fails prevention for all markets.
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