CSDR Client Concerns: Part 2


CSDR Client Concerns Part 2: SSI

CJ Emson

Feb 2022

Standard Settlement Instructions (SSI) and SSI Repository

Ahead of CSDR go live on February 1, 2022, EquiLend surveyed our community of clients across Europe and beyond on the most pressing issues facing market participants regarding CSDR.

Key CSDR concerns for market participants stretched across the full trade lifecycle including Standard Settlement instructions (SSIs), collateral agreement and multiple settlement-related concerns, including partial settlement and returns.

Previously, an EquiLend Insight piece in this series focused on the impacts of CSDR on pre-matching and returns. This time we’ll explore the relative impact of the regulation on SSIs. Add your voice to the discussion on LinkedIn.

The Real Impact of CSDR

The third phase of the Central Securities Depositories Regulation (CSDR) has been live for several weeks now, and the specific impact on the securities lending market has been evident in dollars and dimes in settlement fines.

The daily reality of fines has begun to hit desks, with many now putting substantially more budget aside to be able to deal with losses. Clients are looking at the benefits EquiLend Settlement Monitor provides. Those already making use of the solution when CSDR was implemented saw immediate savings of thousands of euros in CSDR fines on the first day of use alone.

Standard Settlement Instructions and SSI Repository Issues

Frequently mentioned in our research as a cause of concern was failure of a trade on SSI. With complex international banking details and often multiple entities registered for some firms, it is unsurprising that trades so easily fail on SSI without automation. This sentiment has been validated from our analysis of fail reasons for trades, with at least 43% of potential fails related to incorrect SSIs.

The complexity is understandable with examples showing borrowers have a choice of an average of up to 30 different SSIs in a given market. With only a 3% chance of selecting the correct SSI the first time, clients have the potential to be sitting on substantial fines under CSDR. Add to this the staff costs associated with addressing and fixing issues relating to SSI errors and market infrastructure costs in rebooking trades and suddenly this becomes a very costly process.

Cost Considerations and Solutions

The wide-ranging costs collected as a trade moves from front to back office under CSDR can be eradicated by use of EquiLend’s SSI Repository and Settlement Monitor solutions. The repository stores clients’ SSIs in one centralized database. In removing the cumbersome process of maintaining individual client SSIs, the SSI Repository links directly into the Settlement Monitor pre-matching and fail management confirmation process. Crucially, Settlement Monitor can improve the client’s 3% chance of getting the SSI correct the first time to 100%.

Settlement Monitor has the capability to both reconcile the trade discrepancies and provide the correct SSI that the borrower should be booking to. The borrower can automatically update their systems before the message is sent to the CSD, ensuring that the trade is booked correctly off the bat. EquiLend’s Settlement Monitor delivers benefits in the returns process also, helping to keep sub fund bookings in line and display lender SSIs, ensuring the return is booked against the correct sub fund and SSIs.

Clients already leveraging the Settlement Monitor system have seen a complete reduction of failed trades due to SSI management and their overall fail rate reduce by 80%, resulting in no additional pressure on the back office, no delay to settlement and no unnecessary draw on collateral.

EquiLend’s SSI Repository, meanwhile, is additionally tied into our proprietary trading platform, NGT. As part of the pre-matching qualifications for a trade, SSI must be matched on both sides of the trade. Settlement Monitor supports efficient management of those mandatory fields required for settlement. Taking real-time collateral status updates from the EquiLend Exposure system provides confirmation of pre-pay information to enable loans to be released into the market.

EquiLend: Centralized Solutions to Disparate Problems

As the impact of CSDR continues to be realized, our solutions provide real-time resolution to settlement fails throughout the trade lifecycle. With automation, the heavy lift of CSDR will be eased and, in many scenarios, eradicated completely. 

Who We Are

EquiLend is a global financial technology, data and analytics firm offering Trading, Post-Trade, Data & Analytics, RegTech and Securities Finance Platform Solutions for the securities finance industry. EquiLend has offices in New York, New Jersey, Boston, Toronto, London, Dublin, India, Hong Kong and Tokyo and is regulated in jurisdictions around the globe.