.jpg)
The European Association of CCP Clearing Houses (EACH) has today responded to the CSDR Refit-based legislative proposal from the European Commission. Overall, EACH does not have any major objections or issues with the legislative proposal published by the European Commission. Our main point is highlighting the gap left by the removal of Mandatory Buy-in (MBI) regime for the special case of CCP cleared share transactions. Where the proposal on delayed MBI regime is concerned, EACH supports that any potential provisions imposed by the Commission on mandatory buy-ins avoid the ‘one-size-fits-all’ approach. Furthermore, we consider it important to account for how the settlement discipline-related post-trading picture interrelates with the trading picture (e.g., the effects of internalised settlement volumes).
Additionally, the EACH response makes a number of suggested changes aimed at providing operational improvements for CCPs, these covering:
- SME Growth Markets extension period – (new) Article (7)(3) CSDR: We had previously requested for this to be amended to “15 business days” – it has consequently been amended to 15 calendar. EACH politely requests this is amended to “15 business days”.
- Introduction of a ‘pass-on mechanism’ – (new) Article 7(3)(a) CSDR: We request that it is made clear in this article that it is subject to Article 10(a), and that a pass-on cannot be made to a CCP.
- Factors not attributable to the participants – (new) Article 7(4) CSDR: Regarding “reasons not attributable to the participants” and “transactions that do not involve two trading parties” - Why are these exempted from MBIs, but not if cleared by CCPs?
- Consistency of Buy-in timeframes – Article 7(5) CSDR: Having different/shorter extension periods specifically for cleared share fails will likely cause difficulty in pass-on timings along a chain involving cleared and uncleared fails, and risks also unduly de-incentivising central clearing. We therefore politely request the removal of Article 7(5).
- Cash compensation – (new) Recital 7, (new) Article 7(7) CSDR: We believe that Recital (7) should be amended to include a remedy for cash compensation, with an equivalent update to Article 7.7 as that for Article 7.6. We understand this update would be in line with the first two sentences of recital (7) of the legislative proposal.
- The applicability of the CCP exemption – (new) Article 7(11) CSDR: CCPs are not always direct participants in CSDs, so we request that the first paragraph of article 7(11) is amended to remove “participants which are” such that it reads “Paragraphs 2 to 9 shall not apply to failing CCPs, except for transactions entered into by a CCP where it does not interpose itself between counterparties.”
For more information, please see the EACH paper (attached) or visit the EACH website at www.eachccp.eu
