On 2 October 2019, the European Securities and Markets Authority (ESMA) published an updated version of its Q&As on the Central Securities Depositories Regulation (CSDR).
The updated Q&As insert a new question and answer within Part III – Settlement Discipline:
- How should Article 7(12) of the CSDR apply in respect of cash penalties due to, and owed by, a participant against which insolvency proceedings are opened?
As of the date of the opening of insolvency proceedings against a participant, Article 7(12) of CSDR applies and, therefore, Article 7(2) shall cease to apply to the settlement fails caused by the insolvent participant and consequently:
- Cash penalties should no longer be calculated in respect of settlement fails caused by the insolvent participant;
- Cash penalties calculated in respect of settlement instructions involving the insolvent participant until that date should be managed separately i.e. not be included in the aggregated net amounts referred to in Article 17 of the RTS on Settlement Discipline; and
- Cash penalties should not apply to settlement instructions relating to the liquidation of positions of an insolvent participant.