Client Information on the changing schedule of KELER CCP’s compliance project under SDR

Dear Clients and Partners,

Hereby we would like to inform our Clients and Partners about the delay of the entry into force of the Settlement Discipline Regime (hereinafter: SDR), and accordingly inform about the changing schedule of SDR compliance of KELER CCP Ltd. (hereinafter: KELER CCP).

The initial date of entry into force of the SDR requirements was 13 September 2020, which was in the first place amended until 1 February 2021 by a technical standard adopted by ESMA. After that, on 28 July 2020, ESMA issued an official statement, according to which, ESMA is working on a proposal to possibly delay the entry into force of the CSDR settlement discipline regime until 1 February 2022. ESMA indicated that this is due to the impact of the COVID-19 pandemic on the implementation of regulatory projects and IT deliveries by CSDs and came as a request from the European Commission. As a result, on 28 August 2020, ESMA published on its website the final report on draft regulatory technical standards definitively postponing the date of entry into force of the SDR until 1 February 2022, which is available through the following link:
https://www.esma.europa.eu/sites/default/files/library/esma70-156-3490_final_report_-_csdr_rts_on_settlement_discipline_-_postponement_until_1_february_2022.pdf

The final delegated act on postponing the date of entry into force of SDR is expected to be published by ESMA in the next couple of months.

As it was highlighted in our Client communication in June 2020, KELER CCP has identified the following topics from SDR requirements to be relevant for KELER CCP, which potentially affects our Clients as well:

  • extension period;
  • managing settlement instructions after a settlement fail;
  • buy-in procedure, participants of it, related cash movements;
  • cash compensation method;
  • implementing cash penalty regime under SDR;
  • sanctioning the consistent and systematical settlement fails.

Close cooperation of KELER Group is essential regarding the developments, as several points of the above mentioned requirements affect the settlement system of KELER Ltd. (hereinafter: KELER) beyond KELER CCP. Thus SDR compatibility of KELER’s settlement system is essential to ensure the full and automatic compliance of KELER CCP and the market as a whole.

The modifications and changes from the perspective of our Clients, in connection with KELER CCP’s SDR compliance, are mainly considered to be in accordance with the general business terms and conditions, due to the implementation of the harmonization standards affecting the settlement framework of the central counterparty. Based on our preliminary plans, Clients of KELER CCP will not need to realize IT developments due to KELER CCP’s SDR compliance.

At the same time, IT developments regarding SDR compliance are significant tasks for KELER CCP – mostly in house-, which are implemented in one phase within KELER Group, in line with the planned go live of the KELER Service Development Program (KSDP).

Based on the requests of the market participants presented at KSDP workshop held with Clients, as well as considering legislative changes, KELER changes the go-live date of the KSDP Program from March 2021 to late November / early December 2021, from which it already informed its Clients in September 2020. Based on feedback from Clients, the entire client-side (CSD) SDR functionality can be implemented by the modified date, so KSDP can go live with the full planned KSDP/SDR functionality at the launch date in late November / early December 2021. Consequently, the go live of the IT developments are going to be realized well before the date of the SDR compliance.

Due to KELER CCP’s special nature, SDR compliance of KELER CCP is also affected by the ongoing discussions with the national (MNB) and international supervisory authorities (ESMA / European Commission) in connection with the interpretation and the implementation of the regulation.

KELER CCP takes into account as far as possible, the interests and concerns of its Clients during the scheduling of its compliance project, thus we also consider important to leave sufficient time for the preparedness.

As indicated above, KELER CCP plans the entry into force of its SDR compliance in line with the mandatory application deadline, as of 1 February 2022.

In the upcoming months, KELER CCP continues its negotiations already started with the regulators and after clarifying the key issues, will continuously publish its guidelines related to the compliance issues important for the Clients and the detailed specifications of the expected changes.

Should you have any further questions, please do not hesitate to contact us at the email address kelerccp@kelerkszf.hu.

Thank you for your cooperation and patience!

Sincerely,
KELER CCP Ltd.