The European Securities and Markets Authority (ESMA) has published a consultation paper on guidelines on participant default rules and procedures under the Central Securities Depository Regulation (CSDR). The draft guidelines are addressed to central securities depositories (CSDs) (as defined under article 2(1) of the CSDR) and their Member State competent authorities.

Article 41 of the CSDR on participant default rules and procedures provides that:

  • for each securities settlement system it operates, a CSD shall have effective and clearly defined rules and procedures to manage the default of one or more of its participants ensuring that the CSD can take timely action to contain losses and liquidity pressures and continue to meet its obligations.
  • a CSD shall make its default rules and relevant procedures available to the public; and
  • a CSD shall undertake with its participants and other relevant stakeholders periodic testing and review of its default procedures to ensure that they are practical and effective.

The mandate for the guidelines are limited to the subject-matter and scope of Article 41 of the CSDR, which relates to rules and procedures for the management of the default of one or more of its participants. The purpose of the guidelines is therefore not to specify further the concept of “default” in relation to a participant, but only to provide guidance on the steps a CSD should set up and follow in case such default occurs.

The deadline for comments on the consultation paper is 30 June 2016. ESMA will consider the feedback it receives to the consultation with a view to finalising the guidelines by Q4 2016.

View ESMA consults on CSDR guidelines on participant default rules and procedures, 31 May 2016