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Top 5 Responses to Unanswered Live Audience Questions

Q1. Why you think large broker dealers are not considering to offer buy-in agent services? Given it is likely they would have the largest inventory of different stocks.

AFME: We don't see any material barrier to brokers acting as a buy-in agent. The uncertainty regarding the exact role and responsibility of the buy-in agent may discourage firms from offering this service. For example, the regulation says the buy-in agent must not have a "conflict of interest" but does not define what this means.


Q2. If a trade is subject to Penalties, is it also subject to an Interest Claim?

AFME: The view of AFME members is that Interest claims and CSDR Penalty claims should be considered separately. Both can be initiated on the same instruction.


Q3. What about Netting a Buy and sell with a broker of the same name? Will that remove buy-in risk or failure penalty?

Sachin Mohindra: Netting can help improve settlement efficiency, although it doesn't completely remove the trading obligation until fully settled. Netting should generally be encouraged to increase the likelihood of timely settlement and reduce fail chains.


Q4. Isn't it an issue if clarification around amendments to the legislation are not provided until later in 2021 given the lead time required to implement changes and development across the industry?

AFME: Yes. All trade associations have made this clear in their consultation paper submissions. Our preference would be for a split approach where settlement penalties are implemented first, evaluated together with the other pre-trade measures and further analysis of the impact of a buy in on trading. If the Commission decides that a buy in is still necessary, we advocate for a discretionary, rather than mandatory, buy in to minimise the overall impact.


Q5. What will happen if the transaction is put on hold due to OFAC reasons? Would this buy-in charges be waived?

Sachin Mohindra: There is nothing explicitly in the regulation that factors this in as a valid reason not to initiate a buy-in. Although in this particular case a review of the governing laws will be required by your legal team to take the correct action.

Emma Johnson: This is a great question! There is no particular ISO code for OFAC and any other AML related hold so it will look and behave like a genuine fail. Currently in the regulation as drafted the only exemptions for a buy-in is if the counterparty is insolvent so this is a genuine gap and communication will be essential between trading parties why the trade is on hold. A discretionary regime would solve this situation as it would give more flexibility and trading agreements should also have provisions in place for these situations.

See more speaker responses here