Delay to the EU CSDR mandatory buy-in regime
25 November 2021 ICMA very much welcomes the news of the delay to the CSDR mandatory buy-in regime. ICMA has long taken the position that this regulatory initiative contained a number of critical design flaws as well as ambiguity around scope and process, not only from an implementation perspective, but also with respect to the potential implications for EU bond market liquidity and stability. ICMA looks forward to engaging further with the European Commission and ESMA as they review the role of regulatory buy-ins in the European bond markets, and how this sits with the objectives of CMU. Meanwhile, the ICMA Buy-in Rules, part of the ICMA Secondary Market Rules & Recommendations, will remain an effective and accessible contractual remedy for settlement fails in the international bond markets.
ICMA first published an impact study of mandatory buy-ins (MBI) for bond market pricing and liquidity in 2015, which first drew attention to the risks embedded in the regulation. Its 2017 position paper supported the implementation of CSDR Settlement Discipline (SD), but recommended that MBIs not be implemented; rather the provisions should be reviewed while the impact of other SD measures, such as cash penalties, be assessed. ICMA also called for the European Commission to undertake a robust impact assessment of MBIs on market functioning. In recent years, other associations, both European and global, have joined ICMA’s calls to postpone and review the EU MBI regime and in 2019, ICMA published an updated impact study, which importantly highlighted the growing concerns of investors, who would be the most adversely impacted by the regime.