Secondary Markets
Secondary Markets
by Andy Hill, Elizabeth Callaghan and Lisa Cleary
CSDR mandatory buy-ins CSDR Review In February 2021, ICMA responded to the European Commission’s targeted consultation on the Review of CSDR. ICMA’s response focuses exclusively on the section relating to Settlement Discipline, in particular the provisions relating
to mandatory buy-ins, which ICMA points out is market Regulation, not post-trade regulation. In its response ICMA provides data and analysis to illustrate the expected impacts of the mandatory buy-in regime on EU bond market pricing and liquidity, and the costs that will be incurred by investors and potentially issuers. The response also seeks to evidence the procyclical and destabilising effects the regime would have had during the March-April 2020 COVID-19 market turmoil.
Estimated Volume of buy-ins under CSDR Non-Financial Corporates Jan-Aug 2020 (Total value: €30.2 billion)
As well as noting extensive cross-industry work, which is already under way, to improve settlement efficiency in the EU, ICMA recommends that the implementation of the CSDR settlement discipline measures focuses on the cash penalty mechanism. It is suggested that the regulatory authorities
PAGE 38 | IS S U E 61 | SECOND QUARTER 2021 | ICMAGROUP.ORG
monitor the impact of cash penalties on both settlement efficiency rates and market liquidity over an appropriate time period, then recalibrate the penalty levels as required. During this time, mandatory buy-ins should not be implemented.
