On 25 May 2018, the European Commission published the text and related annexes to a Commission Delegated Regulation supplementing the Regulation on improving securities settlement and regulating central securities depositories with regard to regulatory technical standards on settlement discipline.

The Delegated Regulation:

  • specifies the timing and the content of communications between investment firms and their clients concerning trades that should be settled in the securities settlement systems operated by central securities depositories (CSDs);
  • requires CSDs to take several measures to limit the number of settlement fails;
  • requires CSDs to put in place systems that enable them to monitor the number, value and length of settlement fails;
  • requires CSDs to charge cash penalties to users that cause settlement fails;
  • sets out measures concerning mandatory buy-in;
  • specifies the timeframes for the launch of the buy-in process and the delivery of financial instruments following the buy-in process;
  • specifies when CSDs may discontinue its services to users that consistently and systematically cause settlement fails; and
  • specifies the settlement information that CSDs should provide to central counterparties and trading venues.

The Delegated Regulation will now be considered by the Council of the EU and the European Parliament. If neither objects, it will enter into force 24 months after its publication in the Official Journal of the EU.

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