ESMA (the European Securities and Markets Authority) has today released a second consultation paper on CSDR (Central Security Depository Regulation) with a focus on the mandatory buy-in regime that it affects in the event of a fail.

The second consultation paper comes after the first consultation paper revealed serious misgivings from the market about the buy-in operation. The general consensus was that CSDs themselves should not be involved in the buy-in phase and that rather, buy-ins should be executed at the trade level.

“This piece of market regulation, buried among what is primarily meant to be settlement regulation, will have a profound and dramatic impact on liquidity and pricing for the European capital markets,” says an ICMA Impact Study for CSDR Mandatory Buy-ins[1].

A wave of new and amended regulations was inevitable following the post-2008 financial crises and set in stone during the 2009 G20 Pittsburgh Summit, where world leaders set out the path to financial transparency, consistency and fairness - always key goals of global markets - through measures such as central clearing and trade reporting. In Europe the headline regulation was the European Market Infrastructure Regulation (EMIR) which has set about introducing clearing and reporting to European derivatives markets, alongside other regulations effecting settlement and fund management.

Wave 1 of T2S (Target2-Securities) is set to go live on 22 June, representing the first step towards the implementation of a single settlement platform across Europe. The project was first conceived in 2006 and launched in 2008. Throughout its existence, the project has been subject to numerous delays and as the starting line approaches, it looks as though it could face another.

“Target2-Securities (T2S) will be a major success and will enable a true union of capital markets – it will go beyond the EU, supporting deeper, more liquid collateral pools,” asserts Xavier Rolet, CEO of the London Stock Exchange Group. “I have a strong belief in the T2S project – shown by the fact that Monte Titoli was the first to confirm its participation in the first Wave of T2S.”

LSEG is confident that T2S, through Monte Titoli, represents an opportunity for the group.