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attractive financial services centre . It could appear that the UK is taking a different approach to post-trade regulation , following its decision to not to implement the SDR rules . It did , however , state it would consider the future approach of the rules to the UK ’ s own post-trade framework . The danger here for firms is that regulatory fragmentation could require double the amount of work and resources to stay compliant in both jurisdictions . “ With the UK opting out of CSDR , there will be separate regimes around settlement discipline . It may look to align with some aspects of CSDR , but set to publish the findings of its review in the second quarter . Many are hoping European regulators will do away with the buy-in regime ( which seems highly unlikely ) or to implement it on a discretionary basis . As a result , European regulators could implement more favourable changes so that it is more aligned with the UK . “ We have pushed for a voluntary buy-in regime rather than a mandatory one , and specific exemptions in terms of products and operations which should be out of the scope of the SDR . The UK move not to implement the full CSDR rules will bring the attention from EU regulators ,
“ With the UK opting out of CSDR , there will be separate regimes around settlement discipline . It may look to align with some aspects of CSDR , but right now it looks like there will be a dual system affecting crosslisted shares .”
RETO FABER , HEAD OF DIRECT CUSTODY AND CLEARING , EMEA , CITI competitive . “ With trading volumes moving around between venues , post-trade services must now offer much more price flexibility and more variable cost , which will act as a further stimulus to mutualisation . The increased complexity also highlights the necessity of better data models , to spot inefficiencies , such the costs of a fail for example .”
Regulatory fragmentation As mentioned above , the UK is also seeking to overhaul certain European regulations to make itself a more right now it looks like there will be a dual system affecting cross-listed shares . This is going to bring additional and duplicated costs , as well as increased complexity to deal with multiple regimes ,” highlights Reto Faber , head of direct custody and clearing , EMEA , Citi . That being said , the decision by the UK to implement CSDR differently could provide a glimmer of hope for banks and investment managers that the EU will review its contentious mandatory buy-in regime . " Fragmentation is going to come on a wider scale throughout the year . With the UK implementing SDR separately , the regulation may come back to the table very differently where they could make the buy-in optional rather than mandatory . But the market is waiting on how the UK will implement SDR , causing some operational challenges to firms that are international . Those that have project plans in place are working on the EU regime , so the challenge is to anticipate how different the UK will be ,” adds BNY Mellon Pershing ’ s Gibson . The European Commission recently closed its consultation of CSDR and is and it is a good thing to help us push our various points ,” says Boucheta . In addition , Broadridge ’ s Pandiri believes that regulators will eventually look to align their respective frameworks that can preserve the flow of securities processing and post-trade activities . “ While it looks like regulatory fragmentation at present , I do see this as a ‘ creation moment ’ for things coming back together , as practical market innovation starts to produce more fungible solutions that actually make securities processing easier across markets ,” Pandiri says . Going forward , the UK and EU will most likely stay in close contact when formulating and implementing financial services regulation . The UK has been a leading voice for many of the postfinancial crisis regulations , and it is hoped their expertise will continue to be leveraged . “ The UK played a very important role in Brussels , and though it is no longer directly involved , it should carry on discussions for securities services regulations to avoid unintended consequences ,” Boucheta concludes .
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