The European Commission is proposing that CSDs introduce fines in cases where trades are not settled on the intended settlement date, according to UK newspaper the Financial Times (FT), which reported it had seen an advanced copy of the draft.
The Commission believes the rules would serve as a deterrent penalty mechanism for settlement fails, the FT reports. The regulator is worried about the increasing number of settlement fails due to the risk they pose to the financial system and the consequences of differing settlement timeframes across Europe – causing “disruptions when securities are settled across border,” according to the report.
The EC is planning to reform the settlement system by introducing a two-day settlement cycle to ensure consistency of settlement timeframes, scrapping paper-based share certificates and making electronic registration prior to securities being traded mandatory, the FT reports.
(JDC)