Reform history

The penalty mechanism referred to in the first subparagraph shall include cash penalties for participants that cause settlement fails (‘failing participants’). Cash penalties shall be calculated on a daily basis for each business day that a transaction fails to be settled after its intended settlement date until the transaction is either settled or bilaterally cancelled. The cash penalties shall not be configured as a revenue source for the CSD.

ESMA shall, in cooperation with EBA and the competent authorities and the relevant authorities, submit reports to the Commission providing assessments of trends, potential risks and vulnerabilities, and, where necessary, recommendations of preventative or remedial action in the markets for services covered by this Regulation. Those reports shall include an assessment of the following:

(a) settlement efficiency for domestic and cross-border operations for each Member State, taking into account at least the following:

(i) the number and volume of settlement fails and their evolution;

(ii) impact of cash penalties on settlement fails across instruments;

(iii) the duration and main drivers of settlement fails;

(iv) the categories of financial instruments and markets where the highest settlement fail rates are observed;

(v) an international comparison of settlement fail rates;

(vi) the amount of the cash penalties referred to in Article 7;

(vii) where applicable, the number and volumes of mandatory buy-ins referred to in Article 7a;

(viii) any measures taken by competent authorities to address situations where a CSD’s settlement efficiency over a six-month period is significantly lower than the average settlement efficiency levels recorded in the Union market;

(aa) the settlement efficiency levels in comparison to the situation in major third-country capital markets as well as in terms of instruments traded and types of transactions executed in such markets;

(b) the appropriateness of cash penalties for settlement fails, in particular the need for additional flexibility in relation to those penalties for settlement fails in relation to illiquid financial instruments;

(c) the number and volume of transactions that are settled outside the securities settlement systems operated by CSDs and their evolution over time, including a comparison with the number and volume of the transactions that are settled in the securities settlement systems operated by CSDs, based on the information received under Article 9 and any other relevant information, as well as the impact of that evolution on competition in the settlement market and any potential risks to financial stability from internalised settlement;

(k) the application of the sanctions and in particular the need to further harmonise the administrative sanctions for the infringement of the requirements laid down in this Regulation;

(l) the handling of notifications submitted in accordance with Article 25(2a).

The reports referred to in paragraph 1 shall be submitted to the Commission as follows:

(a) every two years for the reports referred to in paragraph 1, points (a), (aa), (b), (c), (i) and (l);

(b) every three years for the reports referred to in paragraph 1, points (d) and (f);

(c) at least every three years, and in any case within six months from a peer review exercise carried out in accordance with Article 24, for the report referred to in paragraph 1, point (g);

(d) upon request from the Commission, for the reports referred to in paragraph 1, points (e), (h), (j) and (k).

The reports referred to in paragraph 1 shall be communicated to the Commission by 30 April of the relevant year as determined in accordance with the periodicity set out in the first subparagraph of this paragraph.