Update on the implementation of the CSDR settlement discipline requirements

UniCredit Bank Slovenija d.d.
CSDR workshop organized by the KDD
Fri, 24/09/2021

The Slovene CSD (KDD) presented the functionalities for the implementation of the CSDR settlement discipline requirements to its members in the workshop held on 22 September 2021. Given the fact that the KDD Rules and Instructions have not been approved yet, the provided information on the CSDR is not yet final.

Workshop participants were presented with updates on KDD’s CSDR developments as well as with the timeline of the market testing and implementation. During the Q&A session the  participants had the possibility to further discuss technical and market practice themes. 

The following topics were on the agenda:

  • General overview of the settlement discipline measures:
    • measures to prevent settlement fails,
    • procedures for monitoring, reporting and disclosing settlement fails,
    • penalties for settlement fails,
    • Buy-in procedure.
    • Detailed presentation of the penalties system for settlement fails (from a technical, operational and legal point of view) and related testing.

 The KDD will provide to its members with a real-time access to the information on the status of the instructions (including on counter instructions).

The Slovene CSD provides the following measures to increase the settlement efficiency:

  • Real-time gross settlement is available to the members, allowing settlement within the settlement day.
  • Possibility of bilateral cancellation of paired instructions.
  • Use of the Hold & Release mechanism for members at the time of instructing or at a later stage.
  • Recycling of the instructions in case of failed settlement.
  • At the moment partial settlement is not possible.

KDD will establish the following procedures for monitoring and reporting of failed settlements:

  • Monitoring of all the relevant parameters of individual failed settlements on a daily basis and according to the prescribed methodology.
  • The status of the instructions will be available to the all the members (as per current process).
  • KDD will establish the procedures to address the causes of failed settlements and improve the efficiency of settlements with the first 10 members with the most failed transactions.
  • Members who will not regularly comply with the settlement obligation, will be temporarily excluded from the settlement system.
  • KDD will use the collected data for the periodic reporting to the regulators.
  • Daily and monthly transmission of the data related to the penalties will be sent to the members with semt.044.

Buy in:

Currently, the process of Buy in is valid only for on exchange transactions and executed by the KDD.

After the implementation of the settlement discipline, the obligation to execute the Buy-in will be on the side of the members (Article 7.10(b)(c) CSDR):

  • On exchange trades: The obligation of the Stock Exchange members (brokers) will be defined in the Rules and Regulations of the Stock Exchange.
  • OTC trades: The obligation of the KDD members will be described in the KDD Rules and Regulations.

Testing with members:

  • Available from 15 November till 23 November 2021. Members will test the calculation of the daily penalties and the KDD will provide the calculation of the monthly penalties for the month of October. A penalty settlement test will also be provided.
  • The so-called “dry-run” will be available from 1 December 2021 and will be done in the production environment: the calculation of the daily and monthly penalties will be done on the basis of real data, but no penalties will be charged.

Impact on investors: Clients should take note of the above additional information from the KDD on the plans for the implementation of the CSDR settlement discipline requirements.