Category: Public

#ECSDA2019: a day towards financial infrastructures of tomorrow

#ECSDA2019: a day towards financial infrastructures of tomorrow

With a line-up of prestigious speakers, panellists and moderators, ECSDA attracted over 190 participants at the Auditorium of the National Bank of Belgium in Brussels on 20 November 2019. The headline of the conference “Towards the Financial Infrastructures of Tomorrow” couldn’t have been chosen better to reflect the core of all presentations, panel discussions and updates.

CMU
The first panel focused on how to deepen Capital Markets Union, and how post-trade could contribute to making the capital flows as easy as movements of persons in Schengen. Existing barriers to further harmonisation, most important being for the insolvency laws and fiscal matters, have been extensively discussed, and there seems to be an overall agreement that the next steps will take time and political willingness to move forward towards a deeper Capital Markets Union. Cross-currency fragmentation remains significant and needs to be overcame.

Regulation, regulation and regulation
Some market infrastructures admitted quite a degree of fatigue after two-three years of heavy efforts on the CSDR implementation. On the other hand, they feel stronger today and better prepared towards the many challenges still ahead. In the debates around the CSDR aftermath, the regulators defend a need for further efforts to preserve a safe and risk-protected post-trade financial system. We learned that a gap analysis between the EU CSDR and the global Principles for FMIs is ongoing. For the review of CSDR, most opinions defend a level of detail that is rather moderate compared to a complete overhaul of the regulation. The regulators view is that it will be a balancing act: CSDR is there to stay, and with the help of the continuously ongoing efforts of representatives and partners such as ESMA, and the different ECSDA Working groups, the foundations are being laid towards CSDR II.

Tomorrow’s Market Infrastructures
The cherry on the cake came with the afternoon elite panel, featuring no less than the Euroclear Group’s CEO, Lieve Mostrey, Deutsche Börse group ExCo member responsible for post-trading, Stephan Leithner, the new ECB’s Director General for Infrastructure, Ulrich Bindseil, and the National Central Bank Director overseeing the Euroclear group, Tim Hermans. Topics such as consolidation, collaboration, harmonisation, innovation and also co-competition were covered from different angles, and we heard loud and clear that smaller market infrastructures ask for an inclusive agenda on the road to the future. Technological challenges for market infrastructures are high on the priority list, but you don’t turn an aircraft into an agile drone overnight.

Innovation and technology
After an expert view on tokenisation and custody of digital assets, which made clear that DLT is definitely there to stay; a last series of presentations covered ID2S’ trajectory as a ‘new kid on the block’; Monte Titoli/LSE’s Data & Analytics journey; and SDX SIX and SWIFT’s digital proposals to bring further value to the global financial eco-system. The panel has broadened the concept of innovation beyond Artificial Intelligence and Blockchain towards crafting new business models and rethinking the eco-systems. The discussions also revealed unanimity about regulation ‘equal for all’: start-up settlement and custody providers must undergo the same regulatory and other requirements as the incumbents. We noted the wise words of ID2S that the CSDR licence is not a burden for a start-up, but a pre-condition of trust granted by their investors and users.

The panellists encouraged to start a joint work on the legal framework for crypto assets, their asset servicing standards, governance and principles for interoperability as immediate priorities. We also noted a warning to watch out for a crypto-assets’ misclassification, e.g. between utility and security tokens, leading to an inaccurate legal regime.

The conclusions from the ECSDA Chairman and a networking cocktail wrapped up an inspiring day.

It was an energizing day full of content about where financial market infrastructures are heading to, what topics are high on their agenda’s and how they are preparing to be future proof. A warm thank you to the speakers, moderators and panellists for their rich interventions, as well as to the organising team that did their utmost for a flawless organisation of the day.

A printable version of the summary can be found here.

Some insights about the Conference can be found on the ECSDA Twitter.

ECSDA issues the CSD Regulation Settlement Fail Penalties Framework

ECSDA issues the CSD Regulation Settlement Fail Penalties Framework

On 20 November 2019, ECSDA issues the CSDR Settlement Fail Penalties Framework.

It can be used by Central Securities Depositories (CSDs) and their participants as a market practice on how CSDs should develop harmonised settlement fail penalties mechanisms, under the CSD Regulation (EU 909/2014) and its standards. Although the document is meant to be evolving, along with the evolution of the views of the competent authorities on the matters under their review, it can be used by the CSDs and their participants to start developing IT systems to comply with CSDR Settlement Fail penalties-related requirements. The Framework was signed-off by the ECSDA Board.

Updated version 17 April 2020

Euroclear Sweden received the CSDR license

Euroclear Sweden received the CSDR license

On 14 November 2019, Euroclear Sweden received its license to operate under the European Union Central Securities Depository Regulation (CSDR) (Regulation909/2014/EU) from the Swedish Financial Supervisory Authority.

More information on the Authorisation can be found here.

The list of CSDs authorised under the CSDR is provided on CSD Facts page of the website.

KDD received the licence to operate under EU CSDR

KDD received the licence to operate under EU CSDR

On 26 September 2019, KDD Central Securities Clearing Corporation, Ljubljana, was granted the licence to continue providing services as a Central Securities Depository (CSD) from the Slovenian Securities Marketing Agency, pursuant to Article 17 of the Regulation (UE) 909/2014 on improving securities settlement in the European Union and on central securities depositories.

Please see the public announcement on the KDD website.

The list of CSDs authorised under the CSDR is provided on CSD Facts page of the website.

Iberclear is granted CSDR licence

Iberclear is granted CSDR licence

On Monday 23 September, IBERCLEAR has been granted the authorization to continue providing services as a Central Securities Depository (CSD), pursuant to Article 17 of the Regulation (UE) 909/2014 on improving securities settlement in the European Union and on central securities depositories.

The information related to the authorization is available on IBERCLEAR web page under “Regulation – CSDR” section.

Please see the full press release

The list of CSDs authorised under the CSDR is provided on CSD Facts page of the website.

Euroclear Finland received a licence to operate under EU CSDR

Euroclear Finland received a licence to operate under EU CSDR

On 21 August 2019, Euroclear Finland, ECSDA Member, received a licence to operate under the European regulation n° 909/2014 on settlement and central securities depositories (CSDR) from the Finnish Ministry of Finance.

More information can be found here.

The list of CSDs authorised under the CSDR is provided on CSD Facts page of the website.

ECSDA raises concerns on EDDI & suggests a solution to increase depth of issuance in EU

ECSDA raises concerns on EDDI & suggests a solution to increase depth of issuance in EU

On 9 July 2019, ECSDA responded to the ECB public consultation on EDDI (European Distribution for Debt Instruments) initiative.

ECSDA welcomes the ECB market consultation on its possible European Distribution of Debt Instruments (EDDI) initiative. ECSDA is committed to further foster the Capital Markets Union (CMU) initiatives and underlines its commitment to increased efficiency in the issuance of debt instruments. CSDs strongly support harmonisation, particularly when enabled by market-led initiatives. Although following discussions and workshops with the ECB and based on the content of the market consultation document, ECSDA believes that several concerns need to be addressed before any decision is made with regard to EDDI.  In particular, ECSDA would like to highlight the following points:

  1. Substantiation and quantification of market demand;
  2. Definition of scope and value proposition;
  3. Compatibility with the ongoing and planned EU CMU and post-trade policy agenda implementation;
  4. Need for a further investigation of the compatibility of different ECB roles;
  5. Compatibility of the need of a “neutral” party with competitive pre-issuance and post-trade markets;
  6. Compatibility of CMU objectives with potential weakening of the infrastructure efficiency for equity, local issuers and local investors;
  7. Compatibility of EDDI with T2S objectives and priorities; and
  8. Complex legal, contractual, and regulatory challenges.

Due to the above-mentioned concerns, ECSDA believes that in the shape it is currently designed, EDDI is not the appropriate solution for the problem indicated in the Eurosystem’s consultation. We recommend considering the above-mentioned concerns before any further decision on EDDI is proposed.

ECSDA believes that the path to further scalability for issuers and enhancing efficiency and depth of issuance across different EU markets is a coherent legislative and fiscal environment across EU. Efficient market practices established at national level may meet specific needs of relevant actors and support issuance of securities in the local market according to the local requirements and expectations. The tax framework applicable to debt issuance remains an element of significant divergence. Though governments use withholding tax applied to debt proceeds for their national budget, ECSDA recommends that the new European Commission identify a path in this area for further harmonisation (without imparting to this national area of responsibility, if there is no such political will). A similar reasoning is applicable to the securities law domain, where harmonisation would be a major catalyst to cross-jurisdictional issuance.  Without such harmonisation, actions undertaken by commercial or public actors will not bring substantial benefits.

We are persuaded that a coherent and harmonised legislative and fiscal framework would be central to the success of the Financial Market and CMU. ECSDA will remain a proactive contributor to the dialogue with policymakers.

ECSDA’s full response can be found here.

ECSDA updates the draft CSDR Settlement Discipline Penalties Framework

ECSDA updates the draft CSDR Settlement Discipline Penalties Framework

On 3 July 2019, ECSDA published the updated version of the draft ECSDA CSDR Settlement Discipline Penalties Framework. The updated version of document can be found here.

The main chapters in the ECSDA Draft CSDR Settlement Discipline Penalties Framework include:

  1. ECSDA CSDR SDR Penalties Framework key considerations
  2. Penalties lifecycle and business days calendar
  3. Penalties scope
  4. Identification of the party to be penalised
  5. Reference/static data required for penalty calculations
  6. Penalties currencies conversion needs
  7. Calculation methods of the cash penalties
  8. Changes to previously calculated penalties
  9. Cross-CSD settlement fails
  10. Collection & Redistribution of penalties (Payment)
  11. Reporting

Other supporting information is also provided in the framework.