September 2019

The Settlement Discipline Regime (SDR), a key element of the Central Securities Depositary Regulation (CSDR), comes into force on 14 September 2020. This effectively binds together trade and post-trade. With penalties for poor performance and discipline, all actors in an institution will need to understand their obligations and make the necessary operational changes

SDR seeks to improve the safety and efficiency of securities settlement, in particular for cross-border transactions, by ensuring that buyers and sellers receive their securities and money on time and without risk.

To achieve this, the regulation provides a set of measures to prevent and address failures in the settlement of securities transactions: cash penalties, mandatory buy-ins and monitoring and reporting measures to be taken by the CSDs. The market should treat these as a “call to action” to be operationally more efficient. From timely and accurate trade bookings through to allocation, confirmation, settlement and inventory management – front, middle and back offices are impacted.

Given that an institution may be performing many different roles – from trading to settlement –  all actors in an institution need to know what their obligations are, what they need to do and when they need to do it.

Deutsche Bank’s toolkit seeks to help on this journey by outlining the impact and obligations on market participants. Market participants should not wait to take these steps. Operational and risk management processes including escalation will need to be reviewed and enhanced, with a number of additional actions required over the course of the settlement lifecycle.

“Ultimately, the custodian will play the role of a valuable information conduit sitting between the CSDs, their clients and their trading parties. In this vein, Deutsche Bank is exploring how real-time data and settlement analytics can provide clients with a risk view of their settlement horizon,” writes James Cox, Head of Securities Services, EMEA, Deutsche Bank in the foreword to the toolkit.

Emma Johnson

Director, Securities Regulation & Market Reform, Deutsche Bank

Emma Johnson

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