A cash penalty is a daily charge that an EU central securities depository (CSD) applies to the participant responsible for a settlement fail, and pays to the counterparty that suffered it. The amount is a rate set by delegated regulation times the value of the failed instruction, with rates that differ by asset type and liquidity.
Settlement failA settlement fail is a transaction that does not settle on its intended settlement date, because securities or cash are missing or the instructions do not match. Under the Central Securities Depositories Regulation (CSDR), fails in EU CSDs trigger daily cash penalties and reporting, and may lead to a buy-in.
CSDR settlement disciplineSettlement discipline is the set of rules in Article 7 of the Central Securities Depositories Regulation (CSDR) that aim to prevent and address settlement fails in EU securities settlement systems. It covers allocation and confirmation duties, matching tools, cash penalties for late settlement and a buy-in regime that the CSDR Refit made a last resort.
CSD (Central securities depository)A central securities depository (CSD) is an entity that operates a securities settlement system and provides the initial recording of securities in book-entry form (notary service) or central maintenance of securities accounts at the top tier. In the EU CSDs are authorised under the Central Securities Depositories Regulation (CSDR).
Mandatory buy-inA buy-in is the purchase of the undelivered securities from a third party after a seller fails to deliver for a set period, with the failing party paying any price difference. Under the review of the Central Securities Depositories Regulation (CSDR Refit), mandatory buy-ins in the EU apply only if the Commission activates them for specific instruments after cash penalties prove insufficient.
CSD (Central securities depository)A central securities depository (CSD) is an entity that operates a securities settlement system and provides the initial recording of securities in book-entry form (notary service) or central maintenance of securities accounts at the top tier. In the EU CSDs are authorised under the Central Securities Depositories Regulation (CSDR).
Settlement failA settlement fail is a transaction that does not settle on its intended settlement date, because securities or cash are missing or the instructions do not match. Under the Central Securities Depositories Regulation (CSDR), fails in EU CSDs trigger daily cash penalties and reporting, and may lead to a buy-in.