An update by the European Association of CCP Clearing Houses (EACH), to its 26-page CSDR settlement discipline framework, has added that CCPs are planning to go ahead with implementing “article 19 SDR” – a penalty mechanism they still hope will be scrapped soon. 

The adjusted position in relation to article 19 of the settlement discipline regime (SDR) is one of several changes in EACH’s updated framework document. Although it now says it is abiding by it, EACH continues to question the article, which spells out a separate penalty mechanism for CCPs compared with other CSD participants. 

“EACH continues to believe that Article 19 SDR is unnecessary as there is no operational or risk based justification for having separate collection and distribution mechanisms for penalties originating from failed cleared transactions and penalties originating from failed non-cleared transactions,” the organisation writes.  

“Therefore the collection and distribution of penalties for cleared transactions should be managed according to the same legal and operational procedures for both cleared and non-cleared transactions.”


Lines up with CSDs on calendars

An update to the framework’s section on penalties expresses that EACH members are aligning with CSDs on “penalty calendars”, and develops their position on scenarios for penalties mismatch. Further, the section on reporting carries updated positions on the daily and monthly reporting of penalties. 

EACH seems to have given up previous hope of stopping article 19 from being implemented, but now targets second best:

“Unfortunately, it does not seem likely that there will be a suitable solution to avoid the duplication of collection and distribution mechanisms for penalties in time for implementation by 01 February 2021. EACH CCPs have therefore decided to implement Article 19 SDR as stated in the regulation. In the meantime, EACH’s will continue advocating for the removal of Article 19 SDR at the latest with a review of CSDR’s settlement discipline regime,” writes the association. 

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