Investment firms should take measures to limit the number of settlement fails, and at least arrange with their professional clients to ensure prompt communication of required settlement information.
This is one of the points laid out in the guidelines, which aim to clarify the scope of the requirements which are contained in CSDR’s article 6(2), and which are further specified in article 2 of RTS, on settlement discipline.

Agreement required

“In particular, investment firms should agree with their professional clients on the communication procedures and messaging protocols to be used between them, in order for the necessary settlement information to be timely provided to the investment firm,” ESMA writes in a press release.

The guidelines also clarify what flexibility the parties have, in organise their communication through written contractual agreement.

“[I]nvestment firms that do not already have the necessary settlement information should communicate with their clients in order to obtain the respective information, which should include standardised data useful for the settlement process,” writes ESMA.