ESMA issues no-action relief for buy-in regime amid deadline uncertainty

The official delay of buy-ins under CSDR is not expected to enter force ahead of the February deadline, so ESMA tells national regulators not to act. 

Europe’s markets watchdog has asked national regulators not to act through supervisory actions in relation to the application of the buy-in regime under the Central Securities Depositories Regulation (CSDR).

The announcement comes as great relief to the industry, as it is unlikely an official delay of the rules will be adopted before the 1 February 2022 deadline. 

Fines for settlement fails and subsequent reporting requirements will, however, come into force on 1 February. 

The move comes a month after the European Parliament and EU Council agreed to make changes to the CSDR in order to allow for the postponement of mandatory buy-ins included within the rules.

After months of anticipation following ESMA’s recommendation to the European Council to delay the controversial aspect of the Settlement Discipline Regime, the move came during a trilogue over the DLT Pilot Regime, where CSDR had been listed under AOB for the agenda. 

Market participants and associations have been lobbying for a scale back in the rules and a delay for a significant amount of time. One of those associations is the Association for Financial Markets in Europe (AFME). 

“The mandatory buy-in rules have been widely acknowledged as being flawed and disproportionate,” said Pablo Portugal, managing director of advocacy for AFME. “Their impact would lead to wider spreads and less liquidity, meaning more expensive and less efficient capital markets for Europe’s issuers and investors.   

“We therefore support the approach to decouple the implementation of the mandatory buy-in rules from all other aspects of the settlement discipline regime. This would allow other appropriate measures, such as the penalties regime, to take effect as planned in February 2022, but avoid implementation of the current buy-in rules.   

“Market participants will be awaiting further clarity from European authorities on the implementation of settlement discipline measures in February 2022 following today’s announcement.      

“The planned review of the CSDR in 2022 should fundamentally reconsider mandatory buy-ins and lead to a more proportionate regime that supports Europe’s capital markets.”  

Speaking to The TRADE  last month, Linda Gibson, director, head of regulatory change at BNY Mellon’s Pershing, said: “We understand that if confirmed, a postponement of some two-three years for the introduction of the MBIs is envisaged.”