On 8 October 2019, the European Securities and Markets Authority (ESMA) issued its final report on standardised procedures and messaging protocols under Article 6(2) of the Central Securities Depositories Regulation (CSDR).
Article 6(2) of the CSDR requires investment firms to take measures to limit the number of settlement fails. It specifies that these measures should at least consist of arrangements with their professional clients ensuring prompt communication of an allocation of securities to the transaction, confirmation of that allocation and confirmation of the acceptance or rejection of the terms in good time before the intended settlement date. This requirement is further specified in Article 2 of the regulatory technical standards (RTS) on settlement discipline, in respect of the content of this allocation message and deadlines for sending these messages.
Article 6(2), third paragraph, of CSDR requires ESMA to issue guidelines on the standardised procedures and messaging protocols to be used for complying with this requirement.
Section 2 of the report contains feedback to the responses received to the ESMA consultation paper issued in December 2018, and highlights where ESMA has changed the proposed guidelines following the feedback received.
Annex I provides the legislative mandate, Annex II provides the opinion of the Securities Markets Stakeholders Group and Annex III sets out ESMA’s view on the costs and benefits associated with these guidelines.
The guidelines in Annex IV will be translated into the official languages of the European Union and published on the ESMA website. Within two months from the publication of the translations, each Member State national competent authority (NCA) will have to confirm whether it complies or intends to comply with the guidelines. If a NCA does not comply or intend to comply with the guidelines, it will have to inform ESMA stating its reasons. ESMA will then publish the fact that an NCA does not comply or does not intend to comply with the guidelines
The guidelines should start to apply from the date of entry into force of the RTS on settlement discipline.