CSD Prague Project 2020

UniCredit Bank Czech Republic and Slovakia,a.s.
Tue, 20/11/2018

Please be kindly advised of the below update received from the local Central Securities Depository Prague (CDCP) on “Project 2020” related to the planned CDS’s technical developments connected with the implementation of CSD Regulation (more details on Commission Regulation (EC) No. 909/2014 (external link)), T2 EUR clearing and Central Counterparty Austria (CCP.A)

 CSDR licensing process

  • Czech National Bank (CNB) confirmed completeness of CDCP´s application on 21st June 2018 and therefore the license should be provided till 21st of December 2018. CDCP will continue to provide issue registration services, central registry of securities, and settlement and clearing services under the new licence, but it will not apply for a banking licence. CDCP operating rules and membership requirements will change from the date the CSDR authorisation is granted. The settlement rules and communication channels will change, with CDCP implementing SWIFT in addition to its proprietary interface. Furthermore, an amended Participant Agreement will be put in place.

     

    EUR clearing

  • CDCP has proposed the possibility of EUR settlement via TARGET2. Two conditions of the proposal are the authorisation of CDCP under CSDR and the publishing of the regulatory technical standards (RTS) for CSDR settlement discipline. The main reasons for implementation of new system are

  1. CSDR requirement for clearing in central bank money (although CSD Prague currently does not reach the threshold),

  2. possibility to offer issuers standardized and secure product including not only CSD´s register functionalities but also settlement and clearing in EURO and

  3. also to mitigate counterparty risk inherent with current solution

     

Given that the RTS on settlement discipline were published in May 2018, the project implementation has been proposed as follows:

 

• H2 2018: Completion of procedural and technical conditions for the participation in TARGET2 at National Bank of Slovakia (NBS);

• H1 2019: First phase of EUR clearing but with no interface change;

• H2 2020: Changes related to RTS on settlement discipline.

 

CCP.A Project

  • PSE is planning to implement a new clearing mechanism based on clearing counterparty. The new clearing services will be provided by the Austrian CCP.A The cooperation is expected to attract banks and broker members of Wiener Börse to become members of the Prague Stock Exchange and will enable members of CCP.A to clear trades concluded on Xetra Vienna and Xetra Prague through one clearing solution. The implementation of CCP.A is interlinked with Settlement Discipline Regime by CDCP including ECSDA Single Settlement Fails Penalties Framework i.e. Late Matching Fail penalty (LMFP) and Settlement Fail penalty (SEFP) – expected go-live 2H 2020



Penalty Rates applicable to settlement fails

 

 

 

Type of fail

Rate

1. Settlement fail due to a lack of shares that have a liquid market within the meaning of point (b) of Article 2(1)(17) of Regulation (EU) No 600/2014, excluding shares referred to in point 3

1.0 basis point

2. Settlement fail due to a lack of shares that do not have a liquid market within the meaning of point (b) of Article 2(1)(17) of Regulation (EU) No 600/2014, excluding shares referred to in point 3

0.5 basis point

3. Settlement fail due to a lack of financial instruments traded on SME growth markets, excluding debt instruments referred to in point 6

0.25 basis point

4. Settlement fail due to a lack of debt instruments issued or guaranteed by:
(a) a sovereign issuer as defined in Article 4(1)(60) of Directive 2014/65/EU;
(b) a third country sovereign issuer;
(c) a local government authority;
(d) a central bank;
(e) any multilateral development bank referred to in the second subparagraph of Article 117(1) and in Article 117(2) of Regulation (EU) No 575/2013 of the European Parliament and of the Council1;
(f) the European Financial Stability Facility or the European Stability Mechanism.

0.10 basis point

5. Settlement fail due to a lack of debt instruments other than those referred to in points 4 and 6

0.20 basis point

6. Settlement fail due to a lack of debt instruments traded on SME growth markets

0.15 basis point

7. Settlement fail due to a lack of all other financial instruments not covered in points 1 to 6

0.5 basis point

8. Settlement fail due to a lack of cash

Official interest rate for overnight credit charged by the central bank issuing the settlement currency with a floor of 0

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).

 

 

















Impact on investors: CDCP's Project 2020 will bring harmonisation of the local post-trading market infrastructure with EU standards.