FIA responds to European Commission’s CSDR review proposal

26 May 2022

FIA and ISDA have submitted a joint response to the European Commission’s legislative proposal to review the Central Securities Depositories Regulation, in particular with respect to reforms of the mandatory buy-in regime (MBI) under Article 7 CSDR.

The primary concern of the associations’ members remains the application of the MBI regime to margin transfers and the physical settlement of derivatives transactions. This would lead to significant uncertainties and unintended adverse consequences as well as the disruption of existing contractual default provisions in ways parties did not contemplate when they entered into the agreement.

FIA and ISDA believe it is crucial for the Commission to clarify that margin transfers and physically settled derivatives are not in scope of the MBI regime. They also recommend targeted amendments with respect to the Level 1 carveouts from the MBI regime, with a view to enhancing legal clarity and avoiding unnecessary costs for market participants.

FIA and ISDA support the Commission’s suggested ‘two-step approach’ based on an ESMA Impact Assessment and, if needed, the option to define the scope and procedure of the MBI for certain types of transactions via the use of an Implementing Act, subject to further specification of measures with respect to ‘appropriate levels’ of settlement efficiency.  

Read the response in full.

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