[ESMA70-156-4448 ] Q&As – Central Securities Depositories Regulation

ESMA has published a new version of the Q&As on the implementation of Regulation (EU) No 909/2014 on enhancing securities Securities Settlement in the EU and on Central Securities Depositories.
The purpose of this document is to promote common supervisory approaches and practices in the application of CSDR. It provides responses to questions posed by the general public, market participants and NCAs in relation to the practical application of CSDR.
It contains one new question on page 36 – as quoted:
>Part III: Settlement Discipline
Settlement Discipline Questions 8 – Partial settlement functionality
(c) Should a CSD set up its partial settlement functionality as a proper functionality or could it be an outcome-based feature?
Answer provided by the European Commission in accordance with Article 16b(5) of the ESMA Regulation (please see the related Disclaimer on page 5):
Article 10 of Commission Delegated Regulation (EU) 2018/1229 (regulatory technical standards on settlement discipline) requires that a CSD allow for the partial settlement of settlement instructions. Furthermore, Article 23 of the RTS on settlement discipline states that where on the last business day of the extension period some of the relevant financial instruments are available for delivery to the receiving participant, the receiving and failing clearing members, trading venue members or trading parties, as applicable, shall partially settle the initial settlement instruction, unless the instruction is put on hold. However, neither the CSDR Regulation nor the RTS on settlement discipline provide a detailed explanation or set instructions as to how to proceed with a partial settlement, implying a certain degree of flexibility in how CSDs are to achieve this outcome.
Therefore, CSDs are free to determine how the partial settlement functionality and its related features are implemented in practice. CSDs should nevertheless actively undertake all necessary steps to make partial settlement available, rather than solely rely on the participants’ initiative.