CSDR: The next headache in bond market liquidity
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CSDR: The next headache in bond market liquidity

A rule many thought had died silently in the legislative process is about to be resuscitated, and bond market pros say it will be devastating to bond market liquidity.


Mifid II is finally off the European Commission’s plate, so commissioners are turning their attention to a regulation some had hoped would have been quietly forgotten.

In particular, one article in the level-one text is riling lawyers and lobbyists representing the bond market.


Andy Hill, ICMA

“It’s an all-round destroyer of market liquidity,” says Andy Hill, a senior director in the International Capital Market Association’s (ICMA) market practice and regulatory policy group.

The Commission has signalled that it expects to endorse the European Securities and Markets Authority's (ESMA) regulatory technical standards for the Central Securities Depositories Regulation (CSDR) in the second quarter, according to a second industry lobbyist.

It hasn’t gotten much attention.

After all, it regards the European financial system’s plumbing – a topic most of humanity ignores until its failures manifest in ugly ways – but it does pose a vital threat to repo markets and the bond markets more broadly, experts say.

The crux of the regulation is its insistence that settlement fails be cured, mandatorily, within a certain time period.

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