A part of the Central Securities Depositories Regulation (“CSDR”) that you probably have missed
Article 9 of the CSDR is a small text (7 sentences), but it requires reporting from any institution, which executes transfer orders (for clients or own account) other than through a “securities settlement system” * (as per point (a) of Article 2 of Directive 98/26/EC). In other words, if you can identify in your books any kind of settlement, which is not executed via settlement system or it can be considered as such, you will qualify as a “settlement internaliser” ** and you will have to comply with this reporting obligation.
What must be reported?
In scope of internalised settlement reporting are transactions and operations like purchase or sale of securities, collateral management operations, securities lending and borrowing, repurchase transactions, transfers of securities between accounts of different investment funds or between two securities accounts of the same client, etc.
Looks like there is significant amount of transactions to be reported, but in contrast with other regulations which demand reporting like EMIR, MiFID2 and SFTR, Art.9 of CSDR requires aggregated data on quarterly basis.
In that regard, the institutions’ individual settlement procedures and methods will have influence on the list and volume of the reportable operations. This means that in-depth impact assessment and study of the internal settlements processes are more than important.
The reports must be produced in machine-readable standardized XML ISO 20022 format and should contain accumulated data for the internalised settlements for the respective period, populated as aggregated figure and percentage, providing information for:
- The settlement internaliser – 8 fields, including LEI, timestamp and contacts
- Reported financial instruments – 10 fields (9 individual + 1 cumulative)
- Types of the reported transactions – 5 fields
- Types of clients – 2 fields
- Cash transfers – 1 field
The data must be separated in two status groups – “Settled” and “Failed”, where all applicable fields to be reported both, as “Volume” and as “Value”, in case the field is not applicable or there is no information to be reported, it should not be left blank, but be populated with zero (“0”).
Where to report?
Every settlement internaliser is required to report its settlement activities to the National Competent Authority designated by the Member State of its establishment and authorized to supervise the respective CSD.
The reporting obligation enters into force on 10 March 2019 and the first report shall be submitted within 10 working days from the end of the first quarter following this date, which means that it is due in July 2019 for the previous period and market participants in scope of the obligation will have to send their first reports to the relevant National Competent Authorities.
ESMA has already published the respective Guidelines, RTS and ITS for Internalised Settlement Reporting, which are directly applicable in all Member States.
How targit GmbH (Member of Be Group) can help?
Our consultants can support you to identify the reportable transactions, to evaluate your processes and data in order to comply with the reporting obligation.
We have an excellent combination of skilled experts and professionals with hands-on style which will assist you to reduce the resource and operational impact of fulfilling the requirements.
targit’s transaction reporting software “tecconTR” is a reliable, user-friendly and easy-to-customize solution, with multi-regulation coverage.
Definitions based on the ESMA documentation:
* ‘securities settlement system’ is a system under the first, second and third indents of point (a) of Article 2 of Directive 98/26/EC that is not operated by a central counterparty and where “system” shall mean a formal arrangement:
- between three or more participants, with common rules and standardised arrangements for the execution of transfer orders between the participants,
- governed by the law of a Member State chosen by the participants;
- designated, without prejudice to other more stringent conditions of general application laid down by national law
** “settlement internaliser” – any institution, including one authorised in accordance with Directive 2013/36/EU, or with Directive 2014/65/EU, which executes transfer orders on behalf of clients or on its own account other than through a securities settlement system.