On 1 February 2016, the European Securities and Markets Authority (ESMA) published draft regulatory technical standards (RTS) on settlement discipline which ESMA has to deliver for the implementation of the Central Securities Depository Regulation (CSDR).

The CSDR harmonises the authorisation and supervision of EU central securities depositories. It also introduces a mandatory buy-in and other settlement discipline measures to tackle settlement fails. ESMA’s RTS includes details on:

1. measures for preventing settlement fails, through various processes and functionalities, such as:

• automated matching;
• partial settlement;
• hold and release mechanism.

2. measures for monitoring and addressing settlement fails, in particular:

• the cash penalties mechanism; and
• the buy-in process.

The European Commission has now three months to endorse the RTS, followed by a non-objection period of the European Parliament and Council. These rules will then enter into force two years after their publication in the Official Journal of the European Union. This will give enough time to relevant stakeholders to implement the changes needed to comply with the CSDR. For the Technical Standards please see here.