EU CSDR Settlement Discipline Regime: Penalties and buy-ins - Update


Note: This announcement, originally published on 2 April 2020, and updated on 27 November 2020, has been updated to provide new dates and information on testing and dry-run. Changes have been highlighted.

Clearstream Banking1 plans to activate the functionalities relating to the identification, calculation and reporting of cash penalties on 1 July 2021both in test and dry-run mode.

The test mode shall be available until end of August 2021. The dry-run mode will be available until the end of January 2022. 

Further information on the testing and dry-run test will be communicated later. The penalties payment functionalities (that is, monthly collection and distribution of net amounts of cash penalties) will only be activated as of 1 February 2022, not considering any cash penalties calculated and reported by Clearstream Banking before this date.

Note: In October 2020, the European Commission accepted the proposal from the European Securities and Markets Authority (ESMA) and issued a Delegated Regulation postponing the entry into force of SDR to 1 February 2022.

Cash penalties

Clearstream Banking intends to comply with the “ECSDA CSDR Settlement Fails Penalties Framework” unless stated otherwise. The latest version of the document can be found on the ECSDA website.


Clearstream Banking will calculate and apply cash penalties on matched settlement instructions that fail to settle, in full or in part, on and after their intended settlement date (ISD), if both the settlement instruction and the relevant financial instrument are subject to cash penalties.

Instructions subject to cash penalties

  • For internal instructions
    Free of and against payment settlement instructions between Clearstream Banking customers.
  • For Bridge delivery instructions
    Deliveries free of and against payment settlement instructions with a counterparty in Euroclear Bank (EB) 
    Note: Bridge receipt instructions are also in scope of cash penalties but will be calculated and applied by EB. Free of and against payment settlement instructions with a counterparty, outside Clearstream Banking or EB are also in scope of cash penalties, provided that the CSD where settlement takes place is subject to SDR. Such cash penalties will be calculated either by T2S, or by the local CSD itself.
  • Exceptions
    Some instructions are excluded from the cash penalties mechanism, such as instructions related to corporate actions on stock.

Note: Discussions are still ongoing at the ESMA about specific instruction types and events to be excluded from the scope of the SDR. We will inform you as soon as the ESMA has confirmed the list of instruction types, for which no penalty applies.

Instruments subject to cash penalties

Any financial instrument listed in the Financial Instruments Reference Data System (FIRDS) database maintained by ESMA will be subject to cash penalties. However, cash penalties will not apply to shares listed in the Short Selling Regulation (SSR) exemption listed in the Short Selling Regulation (SSR) exemption list.


Cash penalties will be calculated when a transaction matches after the ISD (Late Matching Fail Penalties - LMFP) and when the transaction fails to settle, on and after its ISD (Settlement Fail Penalties - SEFP).

Two cash penalties will be calculated for a given late matching/settlement fail: One negative cash penalty to be paid, applied to the party causing the fail (failing party), and one positive cash penalty (to be received), applied to the non-failing party.

Note: In the sections below, if both instructions are eligible for settlement in the optional period, internal or Bridge transactions, then the relevant settlement period is the optional period. Otherwise, the relevant settlement period is the mandatory period.

Late Matching Fail Penalty (LMFP)

LMFPs will be applied if the transaction matches after the ISD. The LMFP will be calculated only once, will be applied on the day the instruction matches, and will be charged to the last party to send its settlement instruction.

If both parties send their respective settlement instruction after the ISD, only the last customer to send its instruction will be charged the LMFP.

Where settlement instructions match before the end of the relevant settlement period on any business day after ISD, Clearstream Banking shall consider all business days as from the ISD until and excluding the business day that the instruction is matched.

Where settlement instructions match after the end of the relevant settlement period, Clearstream Banking shall consider all business days as from the ISD until and including the business day that the instruction is matched.

Settlement Fail Penalty (SEFP)

SEFPs will be applied on matched settlement instructions and will be calculated on each business day when the transaction failed to settle, in part or in full, on and after the ISD. For partial settlement, Clearstream Banking will calculate the SEFP based on the remaining amount to be settled.  Clearstream Banking will charge the SEFP to the customer whose instruction is not fully settled at the end of the relevant settlement period of the ISD as the instruction is:

  1. on hold;
  2. lack of securities (if 1 does not apply);
  3. lack of cash (if 1 and 2 do not apply). 

If both settlement instructions are “on hold” at the end of the relevant settlement period, both customers will be charged the SEFP.


Clearstream Banking will calculate cash penalties based on the instruction type of the failing party as follows:

Settlement instruction type

Calculation formula

Delivery against Payment

Security Penalty Rate

multiplied by Quantity of non-delivered securities

multiplied by Reference Price

Free of Payment (Delivery and Receipt)

Receipt against Payment

Cash Discount Penalty Rate

 multiplied by Quantity of non-delivered securities

 multiplied by Reference Price

Payment Free of Delivery

Cash Discount Penalty Rate

multiplied by Amount of cash to be delivered

The Security Penalty Rate designates the applicable rate of penalty to be applied, based on:

  • The financial instrument type classification (CFI code);
  • Whether the financial instrument is a liquid or illiquid share; or
  • Whether the financial instrument was traded on a SME Growth Market (as shown on the (optional) “place of trading” information on the settlement instruction).

Depending on the combination of the above attributes, Clearstream Banking will determine the applicable Penalty Rate as in the following table:

Type of fail

Type of securities

Liquidity Indicator

SME Growth Market

Penalty Rate (in bps)

Lack of securities

(Applicable Penalty Rate is called “Security” Penalty Rate)










Sovereign debt



Corporate debt

Money-market instruments





Other instruments (including Exchange traded funds, units in collective investment undertakings, emission allowances, etc.)





Lack of cash

(Applicable Penalty rate is called “Cash Discount” Penalty Rate)




Official interest rate for overnight credit charged by the central bank issuing the settlement currency with a floor of 0

For cash penalties in EUR, the Cash Discount Penalty Rate will be the “marginal lending facility rate” as provided by the ECB divided by 360. For currencies other than EUR (if applicable), the rates to be applied as agreed on ECSDA level will be published in the ECSDA Penalties Framework.

The Reference Price designates the price of the financial instrument used by Clearstream Banking to calculate the cash penalties. The Reference Price will be the closing price of the financial instrument at the relevant MiFID trading venue for the day the cash penalty applies. If no trading venue price is available, a market or default price as determined by Clearstream Banking will be applied.

Clearstream Banking will calculate cash penalties in EUR only. Cash penalties calculated by other systems (for example, T2S, Local CSDs) may be expressed in a non-EUR currency. Clearstream Banking will report such cash penalties as calculated, applied and reported to Clearstream Banking by the relevant system, for instance, will not apply any Euro conversion.


Clearstream Banking will report cash penalties related information to customers via MT537 only. Two new reports will be developed, one to report cash penalties on a daily basis, including details of the calculation (Statement of Cash Penalties), and one monthly report, including the global net amount of cash penalties to be paid or received by the customer (Monthly Aggregated Report). In addition, the Xact Web Portal will be enhanced to enable customers to query and monitor the cash penalties related information.

Daily statement “Statement of Cash Penalties”

Clearstream Banking will distinguish newly calculated penalties from penalties already calculated and modified or removed afterwards. Therefore, new and amended cash penalties will be reported separately. 

Customers will have the possibility to schedule their respective reports directly in Xact Web Portal, selecting one or multiple times (among a selection of thirteen available times, between 8:30 and 18:00 CET). All reports are “delta” reports including, for instance, new or amended cash penalties since the last report sent. If no cash penalty is to be reported at a scheduled time, then Clearstream Banking will provide customers with a “no activity” report.

Monthly statement “Monthly Aggregated report”

As of the 13th penalties business day (PBD), for each customer account, Clearstream Banking will aggregate and net the cash penalties from the previous month, per currency and per counterparty (I)CSD. The resulting net amount will constitute the amount to be paid (if negative) or to be received (if positive) and will be reported to customers in a MT537 Monthly Aggregated Report.

A MT537 Monthly Aggregated Reports will be sent in real time to customers, per market link, once details have been received from such market and successfully reconciled by Clearstream Banking. In addition to the net amounts per currency and per counterparty (I)CSD, the report will also include the payment date of each net amount and the details on the underlying cash penalties.


From the date when the cash penalty was reported and until the 10th PBD  of the next month (the “appeal period”), Clearstream Banking customers may challenge, for exceptional reasons, the application or calculation of a cash penalty, exclusively by using Xact Web Portal in addressing appeals to Clearstream Banking. Appeals sent via other communication media will not be considered.

Important note: Customers that have not migrated to Xact Web Portal are strongly recommended to do so in order to be able to receive penalties information and to address appeals to Clearstream Banking.

Collection and distribution of net amounts

Upon reporting to customers, in a MT537 Monthly Aggregated Report, a net amount to be paid or received, Clearstream Banking will generate a “payment free of delivery” (PFoD) instruction for such net amount. Each PFoD instruction will be generated with a trade date on the 15th PBD of the month, an intended settlement date on the 17th PBD of the month and refer to the same dummy ISIN code “LU2128008567”.

Note: Such PFoD instruction is not subject to penalties.

Mandatory buy-ins

The objectives of CSDR and of the SDR are to foster settlement discipline and to improve settlement efficiency across EU but also to define precise rules if the delivering party cannot deliver the securities at the end of the extended period following the intended settlement date. The receiving party will be required to take the necessary actions to receive the expected securities and shall trigger a mandatory buy-in process whenever possible.

Subject to ongoing “buy-in market practice” discussions by AFME and pending clarifications from ESMA, for non-CCP cleared transactions, where the buy-in is possible, the receiving party shall appoint a buy-in agent on the business day following the expiry of the relevant extension period and will notify the failing delivering party thereof. The delivering party will be requested to put his instruction “on hold” (the instruction will continue to be subject to SEFP).

During the buy-in period, the receiving party shall notify the results of the buy-in to the delivering party at the end of each business day on which the receiving party receives the traded securities and:

  • the initial settlement instructions relating to the settlement fail are cancelled by both parties;
  • new settlement instructions are created by both parties for any non-delivered securities.  To avoid LMFP on these instructions, reference to the buy-in is required.

At the end of the buy-in period, if there are non-delivered securities, the receiving party can decide to defer the execution of the buy-in to a later date or to be paid cash compensation.

For failing instructions in Clearstream Banking´s settlement system that are subject to buy-in or cash compensation, customers shall notify Clearstream Banking of the buy-in or cash compensation results.

Monitoring of settlement fails and “working arrangements” with relevant failing customers

As per Article 7 of CSDR, Clearstream Banking has an obligation to

  • monitor settlement fails,
  • implement “working arrangements” with relevant failing customers,
  • report fails and measures to improve settlement efficiency to its competent authorities on a monthly basis, and
  • publicly disclose anonymised statistics on an annual basis.

In this context, Clearstream Banking will implement a “Settlement efficiency monitoring system”, in order to monitor settlement fails in volume and value.

Customers subject to the highest settlement fail rates (based on LEI) in number or values will be contacted by their respective Relationship Officer to discuss solutions to improve their overall settlement efficiency.  

Further information

Detailed technical specifications about the Xact Web Portal, the reporting of cash penalties and net amounts and the notification of the buy-in or cash compensation results will be communicated at a later stage.

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


1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.