Settling a transaction on an intended date might sound easy. But imagine managing hundreds of thousands of trades a day, from different firms around the world, to settle in only two days – and all without a fail. Impossible? In a nutshell, this is one of the main provisions of the Central Securities Depositories Regulation (CSDR), which aims to harmonize post-trade processes and financial markets infrastructures in the European Union (EU).
To achieve this goal, CSDR established the Settlement Discipline Regime (SDR) with the aim of increasing the safety and efficiency of securities settlement and infrastructures – ultimately enforcing measures to prevent settlement fails by September 2020. The SDR puts into play cash penalties for transactions that fail to settle within their intended settlement date, following the T+2 timeframe mandated in EU. It will also introduce mandatory buy-ins where a failing participant does not deliver financial instruments to the receiving participant within four business days after the intended settlement date. This regime will impact all firms that have trades settling in the EU, regardless of where they are located geographically.
Resolving thousands of transactions quickly and efficiently requires the help of technology. SDR pushes for automation in EU’s securities settlement process, which is not a problem for firms with automated middle and back offices. But for firms that trade in the EU with manual processes, the switch to automation can be costly and challenging.
DTCC’s Institutional Trade Processing (ITP) services provides an optimal no-touch post-trade workflow – an automated process that can help firms conform to the measures mandated by the CSDR and avoid settlement fails.
Preparing for CSDR now can help firms prevent challenges and increased operational costs in the future. When used correctly, the full suite of ITP services can help firms comply with CSDR’s mandates through an optimal no-touch workflow that will reduce settlement fails.
To learn more about CSDR, visit www.dtcc.com/csdr