ESMA Launches CSDR Buy-In Consultation

Europe’s regulatory authority has launched a consultation over the controversial buy-in rule set out in the Central Securities Depository Regulation (CSDR).

Under the incoming regulation, it sets out a new settlement discipline regime whereby failed trades will face a mandatory buy-in, in which the CSD would have to buy back the asset at the prevailing market price and deliver it to the non-defaulting counterparty.

Since the release of the draft technical standards, the European Securities and Markets Authority (ESMA) has received a wave of criticism from the industry over the rules, in which many argue that the CSDs would not be capable to perform the task.

Even Steven Majoor, ESMA’s chairman, said in a speech earlier this year that enforcing the buy-in rule is a “conundrum”.

The consultation sets out three options of where the buy-in should take place: exclusively at the trading level; the trading level but with a fall-back option; or at the CSD/settlement level.

The deadline for comments is August 6. ESMA will submit the technical standards to the European Commission for approval in September.