On May 31, 2022, ISDA and FIA submitted a joint response to the European Commission’s (EC) proposal to review the Central Securities Depositories Regulation (CSDR), with a focus on reforms of the mandatory buy-in regime (MBI) under Article 7 of the CSDR. In the response, ISDA and FIA’s members highlighted the application of the MBI regime to margin transfers and the physical settlement of derivatives transactions as an area of concern, as it could lead to uncertainty and unintended consequences, as well as the disruption of existing contractual default provisions. ISDA and FIA believe it is crucial for the EC to clarify that margin transfers and physically settled derivatives are not in scope of the MBI regime. The associations also recommend targeted amendments to the level 1 carveouts from the MBI regime, with a view to enhancing legal clarity and avoiding unnecessary costs for market participants.
ISDA and FIA support the EC’s suggested two-step approach based on a European Securities and Markets Authority impact assessment and, if needed, the option to define the scope and procedure of the MBI for certain types of transactions via the use of an implementing act, subject to further specification of measures on ‘appropriate levels’ of settlement efficiency.