ESMA Publishes Consultation on CSDR Penalty Mechanism

On 15 December 2023 the European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, published a consultation paper on Technical Advice to the European Commission on the CSDR penalty mechanism.

The consultation aims to collect evidence and data on the effectiveness of the current penalty mechanism in discouraging settlement fails, and incentivising their rapid resolution. In addition, it seeks feedback on ESMA’s preliminary proposals regarding:

  • alternative parameters, when the official interest rate for overnight credit charged by the central bank issuing the settlement currency, is not available;
  • the treatment of historical reference data for the calculation of late matching fail penalties; and
  • alternative methods for calculating cash penalties, including progressive penalty rates.

The consultation runs until 29 February 2024. To view the Consultation Paper click here.

ISLA runs a variety of standing and topic-specific working groups for its members, covering all aspects of advocacy, tax, legal, regulation, and best practice.

We will be discussing this initiative with member firms in our ISLA Market Practice Steering Group in the new year. Learn more about our Working Groups.

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