Buy-ins under the CSD Regulation

6 Aug 2015 – The CSD Regulation and its accompanying technical standards should not require CSDs to play an active role in the processing of buy-in instructions. In line with current practice, buy-ins should be executed at trading level whenever possible, rather than at CSD participant level.

Of the three options put forward in the ESMA Consultation Paper of 30 June 2015, ECSDA believes that the first option is the least disruptive, since buy-ins would be managed by the trading counterparties without that CSDs and their participants be required to play an active role (other than transmitting the necessary information). Despite some limitations and practical difficulties, we understand that this option is supported by the majority of industry players because it would limit the amount of risk to which CSDs and their participants are exposed as a result of the buy-in process.

The other two options could be problematic some CSD links and, depending on how the links are operated, could force CSDs to collect margins from participants, with a repercussion on their risk profile and the risk that cross-CSD links become less attractive.

Irrespective of the option ultimately chosen by ESMA, the technical standards should make it clear that CSDs are only able to issue notifications to their participants, and that such notifications need to be passed on by each party in the transaction chain up until the trading counterparties. CSDs should not be expected to identify or communicate directly with trading counterparties, since they only have visibility on – and contractual relationship with – their participants.

Read the full ECSDA response