In September 2020, harmonized standards to increase settlement discipline for securities transactions will come into force in the European Union as part of the CSD Regulation (Regulation (EU) 909/2014).
The new regulatory framework provides for mandatory buy-ins by a neutral buy-in agent should the securities delivery fail beyond a certain period. In the future, these mandatory buy-ins will affect all types of securities transactions, irrespective of the origin and settlement of the transaction (OTC, on-exchange/MTF, cleared, non-cleared).
Since each market participant processing securities via an EU CSD must be prepared for the situation of a buy-in, Deutsche Börse Group has decided to offer a comprehensive buy-in agent service operated by the newly established company Eurex Securities Transactions Services GmbH, a subsidiary of Eurex Frankfurt AG. Subject to regulatory approval, the solution will provide a high level of standardization and automation in order to resolve the operational burden which is associated with the new mandatory buy-in process.
The new company is expected to take over the execution of buy-ins for centrally cleared transactions of Eurex Clearing AG already in summer 2020 and will also accept buy-in orders from registered customers from non-centrally cleared transactions as of the entry into force of the EU Regulation in September 20201.
To implement the buy-in agent, Deutsche Börse said it was currently building up a new core IT platform. Customers of the Deutsche Börse Buy-in Agent will be able to submit buy-in requests to the system via a GUI or an API.
Based on the buy-in requests from its customers, the Deutsche Börse Buy-in Agent will conduct scheduled, automized auctions in order to source the securities from Network Partners and deliver the securities onward to the buyer in the original transaction. In line with CSDR, service fees charged by the buy-in agent as well as potential price differences shall be borne by the Failing Counterparty in the original transaction.
Network Partners are customers of the Deutsche Börse Buy-in Agent providing liquidity during the scheduled auctions. Network Partners will have to register for this role and will be assigned dedicated User-IDs for their activities in the Network Partner role.
Usage of the Deutsche Börse Buy-in Agent service will require a contractual relationship with Eurex Securities Transactions Services GmbH, which will offer the new platform from summer 2020, subject to regulatory approval. Currently it is expected that the onboarding of customers and a simulation phase can be started from Q2/2020, so that market participants have sufficient time to get familiar with the service before the Settlement Discipline Regime under CSDR becomes effective.