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Securities lending market braced for short-term impact of CSDR

Even the most optimistic observers anticipate a few bumps along the road as the securities lending industry adapts to the new settlement discipline regime imposed under the CSDR.


The European Securities and Markets Authority (ESMA)’s Central Securities Depositories Regulation (CSDR) on securities lending, which was implemented in February, will introduce cash penalties and mandatory buy-ins to transactions that fail beyond intended or contractual settlement dates.

Industry lobbying over unclear elements of the regulation as it relates to securities finance transactions resulted in its introduction being delayed by 12 months. Despite this delay, however, there is still uncertainty over the short-term impact of the regulation.

Paola-Maria Deantoni, public affairs officer at Societe Generale Securities Services, says that the test period prior to implementation highlighted the absence of a single data feed to pick up common elements for the calculation of penalties. She adds that a lack of testing by non-T2S central securities depositories remains a source of uncertainty.

As a consequence of the data feed issue, the European Association of Central Securities Depositories confirmed that price differences between depositories on the same security and same intended settlement date would not be an acceptable reason for appeal.

“Globally, concerns raised by industry participants have been taken seriously and, where necessary, there will be room for escalation after the activation date,” says Deantoni.

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