EU Central Securities Depository Regulation (CSDR) is a European regulatory initiative spawned from the 2008 Financial Crisis with the intent to increase the safety and efficiency of securities settlement and securities settlement infrastructure in the EU. It requires participants to use Legal Entity Identifiers (LEI’s), Market/exchange identifiers (MICs), and MiFID definition transaction types when instructing CSDs. The planned implementation date for the new regulations is currently set for February 1st, 2022. Highlights: Fail Avoidance: verification if trade matches and settles on a timely basis. Cash Penalties for fails; daily calculation and monthly billing of cash penalties by CSDs. New levels of granularity are required when interacting with CSDs and custodians (instructions/hold/release). Project analysis is underway across Broadridge product teams and subject matter experts.
The Secured Overnight Funding Rate (SOFR) has been selected by The Federal Reserve to replace U.S. LIBOR. In response, Broadridge is creating a suite of enhancements for the impact™ system to be delivered in three phases. These enhancements are also considering the BOE’s SONIA (Sterling Overnight Index Average) rate and other global rates replacing LIBOR as they emerge.
The enhancements in this suite will apply to the following interest calculations:
- Bought sold interest calculations
- Daily interest calculations
- Coupon calculations
- Monthly clips and open item generation
- GL posting related to interest
Broadridge Consulting Services is also assisting our clients by providing comprehensive assistance with their end-to-end LIBOR Replacement Programs.
Industry Initiative Updates:
- Automated Claim Adjustment Process [ACAP] - The Federal Reserve Bank Fedwire Securities Service has recently publicized the addition of new features to ACAP. These changes will affect principal and interest payments between participants for repo transactions, fails, and interim accounting.
Implementation date no earlier than Q3 2021, subject to regulatory approval
- DTCC Same Day Settlement - DTCC will expand novation, guarantee of settlement, and risk management for same-day start leg repos and same-day settling transactions.
Implementation date Q1 2021, subject to regulatory approval. Functionality is available for clients to test in UAT.
- DTCC Pair-Off Service - DTCC will offer a new automated facility to pair-off members’ failing obligations. This service is optional to participant members.
Implementation date in Q1 2021, subject to regulatory approval.
- DTCC Account Number Changes - The DTCC participant number will become a four-character alphanumeric value. DTCC will update each of their products to accept the new alphanumeric number over the next few years.
Implementation date for GSD only on January 4th, 2021.
- SWIFT 2020 - For all MT 103 credited payments and rejected payments, a Confirm / Reject / On Hold / Transferred confirmation status will be sent via MT199 within two business days from the date payment is made. Code changes will be made to address MT199 messages sent erroneously to impact™.
Go-live date: November 22nd, 2020