Trade reconciliation specialist, Pirum Systems, has launched a new fails report for the Central Securities Depository Regulation (CSDR), which will require a mandatory buy-in, and fines, for firms that fail to settle trades within a fixed period.
Robert Frost, head of product development and client services at Pirum Systems says, “Following feedback from our CSDR working group, we are introducing a new CSDR fails report that includes estimated CSDR cost – to enable firms to see what the impact is today, in order to remediate their processes ahead of the go-live date.”
With the expected go-live of CSDR in early Q1 2021, sell-side firms have reported concern about the impact of the fail regime, as it may increase the cost of market-making, particularly in illiquid instruments such as corporate bonds, and small cap stocks. Analysis by Pirum shows that its clients could be facing fails fines of €80-110 million per year, with an estimated fails management cost of €120 million and CSDR fines management costs of up to €85 million. The total costs could be as much as €300 million per annum.
For firms at an early stage with their CSDR program, Pirum is pushing for adoption of real-time pre- and post-trade reconciliation and process automation across their securities financing business, including securities lending, repo and collateral postings.
Pirum Systems has also boosted the number of standing settlement instructions (SSI) in its SSI enrichment services, which allow firms to enrich and reconcile SSIs at the trade level, in order to prioritise and minimise fails due to mis-matching settlement instructions. It reports over 35 firms are now using the service to enhance trade files with over 100,000 SSIs and to get a real-time view of SSI instruction problems across markets.
Phil Morgan, COO at Pirum Systems says, “Firms that have taken advantage of the process automation that Pirum offer, have seen fails reduce by nearly 80% across their securities lending and repo businesses, and we are committed to rolling out further services next year to help clients improve this further.'
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