Sweden to Introduce Settlement Penalty Fees

Sweden is set to introduce penalty fees for settlement failures, in anticipation of the incoming settlement discipline regime set out in Europe’s central securities depositaries regulation (CSDR).

According to a notice from Euroclear, which owns Sweden’s CSD, it is proposing a settlement penalty fee of 500 SEK on matched instructions that have failed to settle on the settlement date (T+2).

Sweden has historically been one of the most efficient markets when it comes to settlement, especially in the fixed income market. However for equities, the settlement rate has dropped from 99% in 2009 to below 94% in 2014.

Euroclear Sweden plans to introduce the penalty fees for exchange-traded equities that are back by a central counterparty (CCP).

The date for the introduction of the settlement fee and other measures has not yet been confirmed, and is subject to Euroclear Sweden Board approval on March 11, 2015.

The European Securities and Markets Authority (ESMA) plans to harmonize settlement discipline across Europe, in which the rules consist of a comment set of measures CSDs in Europe will have to adopt to prevent and address settlement failures. It has proposed a phased implementation of the settlement discipline rules, in which the regime won’t take full effect until mid-2017.

However, the European Central Securities Depositary Association (ECSDA) argues the 18 month respite is not long enough, and has called for a 24 month implementation of the settlement discipline regime. It also estimates that implementation of the regime will cost 67 million euros across Europe, or 3.7 million euros per CSD.