ICMA responds to ESMA's consultation on proposed amendments to CSDR settlement discipline rules
14 April 2025 ICMA has today submitted its response to ESMA’s consultation on proposed amendments to the Regulatory Technical Standards (RTS) on CSDR settlement discipline. The ESMA consultation covers two ESMA mandates, one directly related to the existing settlement discipline RTS as well as a mandate to explore further tools to improve settlement efficiency. The consultation is also closely related to the ongoing T+1 discussion, as it picks up a number of proposals that ESMA had already anticipated in their final T+1 report and which are meant to facilitate the EU’s upcoming transition to a shorter settlement cycle. ICMA’s response to the ESMA consultation reflects feedback from members of ICMA’s CSDR-SD Working Group as well as the ERCC Operations Group and also builds on ICMA’s extensive work with members over the past years to help improve settlement efficiency in Europe, including through detailed ICMA best practices, focusing specifically on the use of various settlement optimisation tools such as shaping, auto-partialling and auto-borrowing.
Key messages from ICMA’s response include:
- Regarding the timing of written allocations and confirmations, ICMA recommends a single deadline by the end of trade date, in line with the approach taken in the UK and US.
- ICMA supports ESMA’s proposal to require “electronic, machine-readable” formats for written allocations and confirmations.
- ICMA supports the use of open communication procedures and standards but argues against imposing a specific standard at this stage, such as ISO20022.
- ICMA strongly supports the proposal to require all CSDs to offer hold and release and auto-partialling functionality which are both key tools to support settlement efficiency. These should be further complemented by partial release functionality which is equally important and should be made available by all CSDs.
- As regards the use of auto-partialling, ICMA advocates for a stronger mandate than suggested by ESMA. In particular, we suggest that auto-partialling should become the default and parties should only be able to opt-out if strictly necessary and bilaterally agreed.
- Finally, the consultation also covers a number of other important aspects of settlement efficiency, including the use of Unique Transaction Identifiers (UTIs), Standard Settlement Instructions (SSIs), as well as the use of other important settlement optimisation tools, such as shaping and automatic securities borrowing and lending services offered by the ICSDs. While these are all important aspects that should be further encouraged, we agree with ESMA that these do not require for the time being any additional regulatory mandates. Instead, the ongoing work on T+1 offers an opportunity to agree strong and detailed recommendations in relation to all of those aspects and ICMA will play a constructive and pro-active role in these discussions, particularly when it comes to shaping and other optimisation tools.
In terms of next steps, further to the consultation deadline, ESMA will be reviewing the feedback received and will work on a report for the European Commission (expected in Q3). The Commission, the European Parliament as well as the Council will then have an opportunity to review the proposals before they are adopted, currently expected in Q1 2026.
