CDCP, the Slovak CSD, amends its Operational Rules, Executory decree No. 4 and Catalogue of Services in connection with the implementation of the CSDR Settlement Discipline Regime which will come into effect on 1 February 2022.
The main changes relate to the penalty mechanism and are incorporated in the following articles of the Operational Rules, Part VI, Settlement mechanism:
- Art. 1 - CDCP includes the provisions for the penalty mechanism and settlement fails into the settlement process rules which are now in line with the application of the penalty mechanism under article 20 of Delegated regulation 2018/1229.
- Art. 27 - General provisions on settlement fails.
It specifies how the CSD participant shall adhere to the measures to prevent settlement fails under article 6 and article 7 of the CSDR and the Delegated regulation 2018/1229, including settlement of instructions on Intended settlement date.
- Art. 28 - The provisions identify when the CSD participant is considered systematically failing and describe the procedure for suspending the CSD participant.
- Art. 29 - Rules on the calculation of the cash penalties.
CDCP will calculate and apply cash penalties for each settlement instruction, subject to the penalty mechanism, which fails to settle due to late matching and/or due to lack of securities or cash. Penalties will be calculated for each business day.
On every business day, the CDCP will report to the failing and non-failing CSD participant the cash penalties calculated for the previous business day. The report will include information on penalties and bilateral net position of the CSD participant.
CDCP will apply cash penalties either for late matching or for failed settlements during the same business day.
Additionally, the Operational Rules specify when CDCP can modify or remove the penalty (e.g. in case the entire issue of the securities is blocked or suspended, technical failure of the CDCP or the CSD participant’s default). The CSD participants will be informed about any modification of the penalty the next business day.
- Art. 30 - Rules of Appeal. The CSD participant is entitled to lodge an appeal against the cash penalty in the respective month from the moment when the penalty was reported until the 10th business day of the following month. CDCP is required to inform the CSD participants about the result of the appeal immediately after the appeal is processed.
- Art. 31 - Rules on the collection and distribution of cash penalties.
On the 14th business day the CDCP will report to the failing and non-failing CSD participant the cash penalties for previous calendar month including the overall net position. The credits/debits will be processed on the CSD participants’ accounts on the 17th business day.
-Art. 39.8 - The Activities schedule of the CDCP and the CDCP participants defines the schedule of the penalty mechanism and the deadlines.
More details can be found on the CDCP’s website (here)
Impact on investors: Clients should take note of the above changes in the Operational Rules of the CDCP which will come into effect in the Slovak market on 1 February 2022.