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ICMA publishes a Position Paper on CSDR Settlement Discipline
15 May 2017 ICMA publishes a Position Paper on CSDR Settlement Discipline. The paper was prepared in close consultation with the SMPC CSDR/Buy-in  Working Group, as well as with the SMPC, ERCC, and AMIC. Essentially, ICMA proposes that the cash penalties for bonds should be increased when implemented in 2019, while mandatory buy-ins should not be implemented.

ICMA’s position can be summarized as:
  • ICMA broadly supports the proposed cash penalty mechanism for settlement fails, although it argues that an appropriate calibration of the penalty rates is an essential consideration in its design.
  • ICMA retains its firm opposition to the mandatory buy-in regime, which it argues is fundamentally flawed and will be detrimental to bond market stability and liquidity.
  • ICMA proposes that the cash penalty regime be implemented as scheduled, with a higher than proposed penalty rate for bonds. However, the mandatory buy-in regime should not be implemented as scheduled.
  • The proposed penalty rate for ALL bonds (except SME debt instruments) should be the equivalent of 2.50% annualized.
  • The mandatory buy-in regime should only be implemented as a ‘last resort’ following an assessment of the impact of the penalty mechanism, and other initiatives, on bond market settlement efficiency rates.
The Position Paper can be downloaded here.

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