Settlement instructions sent by central clearing counterparties (CCPs) were a topic in focus as the European Securities and Markets Authority (ESMA) recently added seven more questions and answers to its guidance on CSDR.
Yes, settlement instructions from CCPs may stem from the netting of transactions traded on various trading places – as long as the CCP is able to retrieve the original trading places of each netted transaction, and as long as the trading place in the instruction is the trading place of at least one of the netted transactions.
This is one of the points clarified by ESMAs latest addition to its set of questions and answers on the the Central Securities Depositories Regulation (CSDR). Yet, as another one of the new Q&As states, “there is no obligation under CSDR for CSDs to provide for a field to be populated with the “place of trading” of the transactions”.
“To benefit from the penalty rate applicable to SME growth market transactions, such transactions should not be netted with others,” ESMA also notes in its press release summary.
On the topic of the controversial requirement for a buy-in process, “the length of the extension period should be determined based on the liquidity classification of the relevant financial instrument as of the intended settlement date of the transaction”.