Incoming rules on asset segregation under the central securities depository regulation (CSDR) could lead to market confusion, due to inconsistencies with other regulations.
According to the head of government affairs at Euroclear, Paul Symons, different rules within MiFID, EMIR, AIFMD and UCITS V may be inconsistent with other technical aspects outlined in CSDR.
Speaking during a webinar on the forthcoming regulation, Symons said: “CSDR gives participants the right to decide how they wish to segregate their assets. And requires them to offer choice to their clients too.
“That right might however, be inconsistent with other aspects of legislation particularly AIFMD and UCITS V which may adopt, when ESMA concludes its guidance, a different approach to segregation for investment funds and UCITS funds.
“But certainly there is a choice between omnibus and segregated in CSDR and, as a result, there is a risk that segregation increases throughout the holding chain and that is something of which the market and all market infrastructures are well aware,” said Symons.
Proposed by the EU, CSDR is regulation aimed at harmonising the authorisation and supervision of EU CSD’s.
Initially coming into force in September 2014, many of the requirements indicated are yet to be put into place.
Symons also suggested that there exists a level of uncertainty over the uptake of clients segregating assets.
“It is not yet clear how many clients will wish to segregate or not so this is something we are particularly focused on.”