CSDR penalties: Update on Clearstream Banking LION/CCP/appeals processes

CSDR penalties: Update on Clearstream Banking LION/CCP/appeals processes

21.01.2022

Clearstream Banking¹

advises customers to consider the following information in relation to the go-live of the CSDR penalty regime on

1 February 2022

Penalties related to CCP-settlement instructions

Subject to SDR RTS Article 19, penalties related to CCP-cleared transactions shall not be paid through the CSDs but through the CCPs from their clearing members. The identification of the relevant penalties is with "CMPU flag" information as provided by Clearstream Banking to its customers in the daily and monthly penalties reports.

Due to an internal processing issue, the information provided by Clearstream Banking is currently not correct as it flags by default all penalties as being subject to payment processing via Clearstream Banking; this impacts any CCPs for which the settlement is processed via Clearstream Banking².

New penalties will be correctly reported as from 1 March 2022. Previously reported impacted penalties will be corrected and "updated daily penalties" reports (see the fields and content described below) will be sent shortly after this date.

Note: The amounts of penalties will not be changed but solely the "CMPU flag" information used in the previously sent daily reports. The monthly reporting in March 2022 will show the correct CMPU-flagging, in line with the corrected daily reports. Subject to final confirmation, penalties calculated prior to the fix will also be corrected and show "22F::TRCA//CCPA".

For the relevant CCP-penalties, the impacted fields in the reporting are:

SWIFT MT537 "daily/ monthly penalties"

Trading Party Capacity (PENACUR): currently shows ":22F::TRCA//CSDP" by default. - penalties calculated after the fix will show ":22F::TRCA//CCPA" (note: for penalties applied to Clearing members, the relevant field 22F::TRCA impacted by the fix is the one in subsequence PENACOUNT.)

Amount Computed (PENDET): currently shows ":17B::CMPU//Y" (yes) by default - will show ":17B::CMPU//N" (no) after correction³.

Xact Web Portal

Field "Amount Computed Flag": currently shows "Yes" by default - will show "No" after correction.

Late matching penalties (LMFP) for CASCADE LION stock-exchange transactionsIn the specific case when a Clearstream Banking customer uses the CASCADE LION "partial release ³" functionality generating "already matched" Clearstream Banking LION CSC/ NCSC-T instructions sent to T2S after the intended settlement date (ISD), "late matching penalties" (LMFP) are calculated by T2S and subsequently reported by Clearstream Banking to the Clearstream Banking customers; the securities delivering party is assigned as "to be debited" by default.As a Clearstream Banking internal account/counterparty BIC DAKVDEFFLIO is counterparty on one side of the penalty, Clearstream Banking recognises such penalties as to be removed through its "auto-repair" process. Hence, the initially reported penalty will be "removed" and reported as such via an "updated penalties" report up to 2 days later without the need for Clearstream Banking customers to intervene.However, Clearstream Banking has identified a technical issue in the application of its Clearstream Banking "auto-repair" mechanism leading to the inconsistent or incomplete removal of LMFPs related to LION settlement transactions. Indeed, the "auto-repair" process does currently not systematically remove all such LMFPs. This will be fixed by the end of January 2022 ⁴.Note: After SETGO phase 2 migration of the CSC/ NCSC-T LION transactions, this "cancel/replace" process will no longer apply and the Clearstream Banking "auto-repair" workaround will no longer be needed. The processing of settlement fails penalties (SEFP) is not impacted by the issue. Further information will be provided in the new "Settlement Discipline Regime" chapter of the Clearstream Banking Customer Handbook.Billing of customer penalty "appeals" rejected by Clearstream Banking or its providersAccording to the Clearstream Banking Fee Schedule, appeals that are rejected after assessment by Clearstream Banking or the relevant penalty mechanism provider (for example, T2S) will be subject to a rejection fee in line with the hourly rate for non-STP and manual services.In the interest of its customers allowing them to accommodate to the new penalties processes, Clearstream Banking has decided to not apply its own "appeal rejection" fees up to 31 July 2022. After this time period, the relevant fees will be reported in the Clearstream Banking monthly invoicing and charged accordingly.Further Information

For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.

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1. Clearstream Banking refers to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.

2. CBF-i internal and Bridge "CCP penalties" settling via Creation are not impacted as the reporting is already correct.

3. Partial settlement is not impacted by this issue.

4. Previously reported LMFPs will not be corrected as they will not be subject to the Clearstream Banking penalties payment process.