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Erscheinung:29.03.2019 Closer analysis of scale and risk
Settlement internalisers subject to new requirements for reporting to BaFin
Two capital market participants agree on a price for a security that is then to be transferred from one of them to the other without being held elsewhere in between – this is just one of a number of possible situations that would involve a settlement internaliser.
Definition:Settlement internalisers
It can sometimes be difficult to differentiate between the various financial market infrastructures. A settlement internaliser is any company that transfers securities from one party to another following a trade but is not a central securities depository. Central securities depositories transfer securities too, but settlement internalisers use a different method to execute transfer orders rather than using the securities settlement system of a central securities depository.
BaFin estimates that around 1,300 companies in Germany meet the definition of a settlement internaliser under the CSDR.
Article 9(1) of the Central Securities Depository Regulation (CSDR) marked the introduction of a new reporting requirement for settlement internalisers by the European legislature. The aim of this reporting requirement is to increase transparency regarding the scale of securities settlement outside securities settlement systems. Furthermore, it is intended to ensure that the risks arising from these systems can be monitored and addressed. Under Article 9(1) of the CSDR, all settlement internalisers are required to report their settlement activities to the competent authority. In Germany, this means BaFin.
Under Article 1(1) of Commission Implementing Regulation (EU) 2017/393, the report is to be submitted quarterly within 10 working days from the end of each quarter. The first report is to be submitted by 12 July 2019 for the second quarter of 2019. The information to be reported is set out in Article 2(1) of Commission Implementing Regulation (EU) 2017/391 and the Guidelines on Internalised Settlement Reporting.
Reporting via the MVP specialised procedure
The reports are to be submitted using BaFin’s reporting and publishing platform (MVP Portal). Reports can be submitted either by the settlement internaliser itself or by a third-party notifier authorised by the settlement internaliser. The settlement internaliser remains responsible for the completeness and accuracy of the report even if the data are transmitted by a third party.
The reports are to be transmitted as XML files that comply with the ISO 20022 XSD message definition. A template can be found on the website of the European Securities and Markets Authority (ESMA) under “Internalised Settlement Reporting”. The Message Definition Report that can be found there contains further information on transmission.
In order to submit reports, you will need to register for both the MVP and the specialised procedure “Settlement internaliser reporting”. BaFin recommends that you register soon if you have not done so already. Registration for the specialised procedure has been open since 4 March 2019.
Website announcement and workshop
BaFin provides comprehensive information on its website about the specialised procedure and how to register.
Companies can find information about the reporting requirement under Article 9(1) of the CSDR on the BaFin website on the pages “Stock exchanges & markets” and “MVP Portal”. BaFin will also amend the information sheet about submitting reports on its website at the end of April.
As there could still be some unanswered questions, BaFin is planning to hold a workshop with third-party notifiers and settlement internalisers in May. It will publish specific information on its website in due course.
Authors
Marek Heinl
Edip Acat
BaFin Division for the Supervision of Financial Market Infrastructures
Please note
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