News on the penalty mechanism

In connection with regular market (CDCP participants) update on developments of the Penalty Mechanism that shall be implemented in the Slovak market as a consequence of Commission Delegated Regulation (EU) 2018/1229 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regards to regulatory technical standards on settlement discipline (hereinafter SDR), we would like to inform you about following facts.

Postponement of SDR application

On 8 July 2020 the central depositories engaged in implementation of the Penalty Mechanism under the SDR required through the ECSDA for postponement of the day when the SDR should come into force by one year, with perspective of beginning of applicability from February 2020. On 23 October 2020 the European Commission adopted the Delegated Regulation postponing the date of entry into force of RTS on settlement discipline from 1 February 2021 to 1 February 2022.   


As regards the Slovak market, due to modification of originally published schedule of implementation and testing of the Penalty Mechanism, postponing entry into force date by one year provides additional time for testing and calibration of functionalities and processes related to this mechanism.

Harmonisation of processes related to the Penalty Mechanism.

At the level of Target2-Securities (T2S) works are progressing to finalise changes in processes required due to implementation of the Penalty Mechanism by all central depositories participating in T2S.

ECSDA is awaiting closing of open issues with respect to utilisation of ESMA databases necessary to set the scope and liquidity of securities under the Penalty Mechanism.

Author: Juraj Aksamít

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