Central Securities Depositories Regulation (CSDR): New implementation timeline for CSDR requirements

1.    Introduction

As announced with Eurex Clearing’s Readiness Newsflash from 21 August 2020, Eurex Clearing would like to inform about further steps towards the implementation of the Central Securities Depositories Regulation (CSDR) on 1 February 2022.

The aim of the CSDR is to harmonize certain aspects of the settlement cycle and settlement discipline and to provide a set of common requirements for Central Securities Depositories (CSDs) for both domestic and cross-border transactions. One of the main objectives of CSDR is to improve the safety and efficiency of securities settlement by ensuring that buyers and sellers receive their securities and money in a timely manner and without undue risk.

The CSDR provides a set of measures to prevent and address failures in the settlement of securities transactions (settlement fails) commonly referred to as the settlement discipline and buy-in regime, and will affect transactions with securities settlement from Eurex Exchange and Frankfurt Stock Exchange on the new C7 SCS platform (introduction in September 2021 with application of the current ESMA Short Selling Regulation) as well as Repo business on the current VMS CCP platform.

The timeline for the CSDR project is as follows:

Simulation start: 22 November 2021
Production start: 1 February 2022

Learn now more about the CSDR project on our dedicated initiative page under the following link: Support > Initiatives & Releases > Project Readiness > Central Securities Depositories Regulation. System documentation, circulars, timeline and much more information will be available there for you.

2.  Required action

Please check that you have registered and/or updated your release contacts for CCP via the Member Section, under "Company Contacts > Create Contact > Contact Types > Release". Furthermore, please ensure that your responsible contacts for buy-in processing at Eurex Clearing (ECAG) are maintained and updated in the Member Section accordingly.

In parallel, please subscribe to ECAG circulars and newsflashes on our subscription website under the following link to stay up to date as any communication regarding CSDR will only be distributed via circulars and newsflashes:

Find > Subscriptions

3.  Details of the initiative

A.    Overview of functional changes with the CSDR Penalty Regime

The CSDR level 2 regulation RTS Art. 19 defines the obligation for CCPs to collect and distribute the CSD calculated penalties for their cleared business. In case a settlement instruction has not settled on the intended settlement date, the CSD starts to collect the relevant information for further processing (“status snapshot at settlement cut-off”).

• ECAG has to ensure that all pending trades are available as delivery instructions at settlement cut-off at the CSDs. With (Actual) Settlement Date Netting ((A)SDN) processing for Repo business, ECAG has to resend all delivery instructions for pending trades that were cancelled during the ongoing (A)SDN process before the settlement cut-off and all late blocked trades (with settlement obligation) that were previously not sent to the CSDs. These instructions are sent on-hold (as PREA) shortly before the CSD settlement cut-off and cancelled again at the end of ECAG processing day. For the Trade Date Netting (TDN) process of C7 SCS, instruction availability at the CSDs is ensured.
• For C7 SCS, ECAG will send delivery instructions with MIC code “ECAG” as today, but the new MIC code “ECGS” for SME-related business.
• The CSDs will calculate and provide the penalties for cleared business for late deliveries on ECAG’s settlement accounts. The CSD calculation is binding for CCPs.
• ECAG will receive the CSD penalty calculation on a daily and monthly basis via CSD MT537 penalty report.
• The final monthly CSD penalty data in the MT537 will be mapped (according to CSDR RTS Art. 19) at ECAG from settlement account view to ECAG Clearing Member level. Penalty collection and distribution for the cleared business will be done monthly in sync with the CSD’s OTC penalty process on the Clearing Member cash accounts (on the 17th.business day of the following month).

B.    Overview of functional changes with the CSDR Buy-in Regime

For all instruments cleared by ECAG, the auction tool of Buy-in Agent under the roof of Eurex STS will be used for buy-in processing.

• For non-CSDR instruments, the existing buy-in schedule for non-regulated business will remain as today.
• Currently regulated ISINs under the ESMA Short Selling Regulation (SSR) will be regulated in future with extended scope and changed schedule under the CSDR buy-in regime.
• CSDR regulated mandatory buy-in will be applied on the basis of the pending CSD delivery instruction.
• ECAG will apply the instrument related extension period of the CSDR buy-in schedule before initiating a buy-in. The schedule is based on the CSD reported penalty instrument details, like CSDR instrument class, liquidity indicator and potential SME market.
• Two buy-in attempts on consecutive days will be applied only for the classification as “illiquid shares”, one buy-in attempt for all other CSDR instrument classes.
• ECAG will apply cash settlement after a (partially) not successful buy-in for the remaining quantity immediately after the last buy-in attempt.

C.    Reports

ECAG will provide new CSDR penalty-related reports (XML format) in the Common Report Engine (CRE) based on the CSD MT537 penalty reporting but mapped to the Clearing Member level. Clearing Members have to sign up to receive the new reports.

• Daily report (RPTCB840 Daily CSDR Penalties Report) on single penalty and delivery instruction level, enriched by the underlying trade data per pending delivery instruction
• Monthly report (RPTCB845 Monthly CSDR Penalties Report) of monthly aggregated penalty sums per Clearing Member and in addition with the granularity of single penalty and delivery instruction level
• Billing report RPTCB226 similar to the current fee/fines report RPTCB225, but only monthly in sync with the CSDR penalty booking schedule and with the new collection and distribution view

Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions or FCM Clearing Conditions of Eurex Clearing AG, as applicable.

Attachment: 

• Eurex Clearing AG - CSDR Communication Calendar

Further information