Central Securities Depositories Regulation (CSDR) has the potential to create significant divergence in clearing and settlement rules between the EU and UK, should the UK decide to develop an alternative way of achieving settlement efficiency, according to a new industry report.
The ‘Navigating the CSDR Landscape‘ report, conducted by Funds Europe in association with RBC Investor & Treasury Services, found that 77% of buy side and 79% of sell side entities strongly agree or agree that this is a risk.
“For the moment, the UK is able to sit back and watch. If the UK authorities see significant improvement in market efficiency resulting from the penalty regime in Europe, they may follow suit, but at the moment, it’s too early to draw any conclusions,” says Dean Rook, head of middle office operations at RBC Investor & Treasury Services.
“In the meantime, there will likely be an element of complexity with assets settling in both CREST, the settlement system for markets in the UK and Ireland, and Euroclear, which settles and clears securities trades executed Industry Survey on European exchanges.
“Where assets are dual-listed on the UK and European exchanges, the impact of transactions settling late on Crest and EEA Domestic markets will be different. This in itself may be an insufficient driving force to align the different markets but is a further example of complexity that, over time, could influence market convergence.”
The same report found that lead time was the most common lesson learned from CSDR implementation from buy side (24%) and sell side (23%) respondents when asked to indicate what they learned from implementing the regulation.
© 2022 funds europe
