Lack of awareness of CSDR implications, says BNY Mellon’s Mark John
05 July 2019 London
Image: Shutterstock
There is a stark lack of awareness of the implications of the Central Securities Depositories Regulation (CSDR) across the market, according to Mark John, director of the clearance and collateral management unit at BNY Mellon.
John indicated that this lack of awareness is seen across the securities trading and settlement value chain.
He said: “Traders that have not been made aware of the additional charges that will be incurred post-trade will have a big shock.”
“If the back- and middle-office does not have the resource capability or technology in place to solve problems impacting settlement efficiency, then the commercial viability of this whole value chain overseeing the trade lifecycle is under threat.”
On 12 July 2019, financial services firms on both the buy-side and sell-side will be required to file their first internalised settlement report in order to comply with the latest instalment of CSDR.
John said that in practice, this deadline means companies will need to categorise their trading data for the past three months into a pre-set template to demonstrate the efficiency and processes of their trades, by 12 July.
John affirmed that failure to comply with the regulation could have a big impact on companies, their clients, and the future of market liquidity levels.
He said: “Despite the imminent deadline, just 38 percent of market participants claim to have understood and assessed all impacts of CSDR on their business. CSDR has good intentions, but these will only be realised if it leads to the reduction and exposure of poor settlement processes.”
“The main outcome will be financial–with cash penalties for inefficient settlement processes that result in failed trades, as well as the implementation of mandatory buy-ins after failed trades. The longer term impact is reputational–the increased transparency across the market means a naming and shaming of those with poor practices.”
He added: “CSDR is a rethink of how transactions are recorded and processed, not only for those internalised within the systems, but also what we send out to the market.”
John indicated that this lack of awareness is seen across the securities trading and settlement value chain.
He said: “Traders that have not been made aware of the additional charges that will be incurred post-trade will have a big shock.”
“If the back- and middle-office does not have the resource capability or technology in place to solve problems impacting settlement efficiency, then the commercial viability of this whole value chain overseeing the trade lifecycle is under threat.”
On 12 July 2019, financial services firms on both the buy-side and sell-side will be required to file their first internalised settlement report in order to comply with the latest instalment of CSDR.
John said that in practice, this deadline means companies will need to categorise their trading data for the past three months into a pre-set template to demonstrate the efficiency and processes of their trades, by 12 July.
John affirmed that failure to comply with the regulation could have a big impact on companies, their clients, and the future of market liquidity levels.
He said: “Despite the imminent deadline, just 38 percent of market participants claim to have understood and assessed all impacts of CSDR on their business. CSDR has good intentions, but these will only be realised if it leads to the reduction and exposure of poor settlement processes.”
“The main outcome will be financial–with cash penalties for inefficient settlement processes that result in failed trades, as well as the implementation of mandatory buy-ins after failed trades. The longer term impact is reputational–the increased transparency across the market means a naming and shaming of those with poor practices.”
He added: “CSDR is a rethink of how transactions are recorded and processed, not only for those internalised within the systems, but also what we send out to the market.”
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