In a report published on Tuesday 19 November, the European Securities and Markets Authority (ESMA) presented its recommendations to the European Commission on the penalty mechanism of the EU on Central Securities Depositories Regulation (CSDR) (see EUROPE 13105/17).
The aim is to improve the efficiency of financial settlements, in particular with a view to reducing the settlement time for securities transactions from two (T+2) to one day (T+1) (see EUROPE 13527/22).
ESMA recommends introducing new parameters for calculating penalties for lack of liquidity, establishing rules for the treatment of historical reference prices and moderately revising penalty rates by asset class. The Authority recommends maintaining the current structure of the mechanism while strengthening its effectiveness in encouraging compliance with settlement deadlines.
According to ESMA, since February 2022, the CSDR penalty mechanism has enhanced the effectiveness of settlements by sanctioning late delivery of securities or liquidity.
ESMA said on Tuesday that the European Commission would take its technical advice into account in revising the relevant delegated regulation, which will then be submitted to the European Parliament and the Council of the EU for consideration.
See the ESMA report: https://aeur.eu/f/eez (Original version in French by Bernard Denuit)