The European Securities and Markets Authority (ESMA) has delayed the introduction of the Central Securities and Depositaries Regulation (CSDR) regime amid concerns market participants will be unable to implement the changes required in time.
The directive has been delayed by six months until 1 February 2021 following “extensive developments” needed for the implementation of the settlement discipline requirements.
In particular, ESMA said the reasons for the delay were to give market participants more time for IT system changes, the development of ISO messages, market testing and adjustments to legal arrangements between parties concerned.
The regulator said in a statement: “ESMA considers it to be appropriate to provide for more time before the start of the application of the new settlement discipline requirements under the RTS on settlement discipline.”
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CSDR, which was set to come into effect on 13 September 2020, is designed to harmonise settlement standards across the European market.
The new settlement discipline regime is set to affect a wide range of market participants (CSDs, CCPs, trading venues, investment firms, credit institutions) and authorities.
It places an emphasis on entities settling on time with fines implemented on firms that fail to do.
CSDR is an important piece of regulation for the ETF ecosystem due to the harmonising aspect of the regime.
Last year, Ciaran Fitzpatrick, head of ETF servicing, Europe, at State Street told ETF Stream the regime was a “positive” for the ecosystem as it will improve efficiencies despite the implementing challenges entities were facing.
However, Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, warned CSDR could lead to a widening of spreads due to more stringent settlement times.