FCA: New Settlement Internalization Reporting Obligations

From July 2019, firms within the United Kingdom will be obliged to report settlement internalisation to the BoE.

Certain financial firms within the United Kingdom will be obliged to report settlement internalization to the Bank of England from July 2019, the Financial Conduct Authority (FCA) announced this Thursday.

According to the statement released by the FCA today, this will apply to firms that are regulated to perform the following activity:

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  1. arranging safeguarding and administration of assets
  2. safeguarding and administration of assets (without arranging)

Under Article 9 of the EU Central Securities Depositories Regulation (CSDR) all firms who meet the above criteria and are considered to be a settlement internalised – that is, a company that settles transfer orders on behalf of its clients on its own accounts instead of via a Central Securities Depository (CSD), will be obliged to report such activity.

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As per the CSDR regulation, settlement internalizers are required to report to the relevant competent authority on a quarterly basis from mid next year. This report should hold the aggregated volume and value of all securities transactions that have been settled outside of securities settlement systems.

The reports are required to be sent to the Bank of England in London, which is the designated competent authority for the UK, with the first one due by July 12, 2019. This will cover the period from April 2019 until the end of June 2019, the statement says.

Central Securities Depositories Regulation

The CSDR is one of the key regulations that was implemented following the 2008 financial crisis. The main objective of the regulation, as outlined by the European Commission is to “increase the safety and efficiency of securities settlement and settlement infrastructures in the EU.”

To achieve this, the securities and depository regulation has numerous measures in place to improve transparency, as the European Union (EU) has identified CSDs and central counterparties (CCPs) as integral in safeguarding the financial markets.

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