According to Article 9(1) of CSDR , settlement internalisers shall report to the competent authorities of their place of establishment on a quarterly basis the aggregated volume and value of all securities transactions that they settle outside securities settlement systems. Competent authorities shall, without delay, transmit the information received to ESMA and shall inform ESMA of any potential risk resulting from that settlement activity.
The content of the STT-reporting shall be stored from the beginning of April 2019. The collection of data on internalised settlement will be carried out by the FIN-FSA from the beginning of October 2019. The collection starts with Q3 2019 data only.
See figure 1. Reporting and submission periods
The concept of internalised settlement
The content of the STT-reporting is further specified in the EU regulation. According to Article 1 of the Commission Delegated Regulation (EU) 2017/391 (RTS on internalised settlement)
For the purposes of this Regulation the following definitions apply:
- 'Internalised settlement instruction’ means an instruction by a client of the settlement internaliser to place at the disposal of the recipient an amount of money or to transfer the title to, or interest in, a security or securities by means of a book entry on a register, or otherwise, which is settled by the settlement internaliser in its own books and not through a securities settlement system.
- 'Failed internalised settlement instruction’ means non-occurrence of settlement, or partial settlement, of a securities transaction at the date agreed by the parties concerned due to a lack of securities or cash, regardless of the underlying cause.
A settlement internaliser established in Finland should be responsible for reporting the settlement that has been internalised in its books only. Internalised settlement can occur at different level of a securities holding chain (global custodians, sub-custodians, etc.) and it should be reported at the level where it takes place. A settlement internaliser should send the information required under Article 9(1) of CSDR even if there is only one transaction per quarter. On the other hand, a reporting entity is obliged to report also when there is nothing to report. The description of electronic reporting (STT reporting) provides further details on the so called zero reporting. FIN-FSA has detailed the requirements for sending zero reports. The reporting obligation continues normally. Entities should report to the FIN-FSA according to Article 9(1) of CSDR as follows:
- one report for its activity in the Member State where it is established (including the activity of its branches in that Member State);
- separate reports for the activity of its branches per Member State and ETA country;
- one report for the activity of its branches in third countries.
See figure 2. Overall process of the data flow
ESMA Guidelines on Internalised Settlement Reporting under Articla 9 of CSDR give some examples of reporting under different circumstances.
Commission Delegated Regulation (EU) 2017/391 (RTS on internalised settlement) contains detailed information on the reporting obligation in its recitals (2).
“A settlement internaliser should only report internalised settlements where it has executed a settlement instruction by a client of the settlement internaliser in its own books. A settlement internaliser should not report subsequent alignments of book-entry positions to reflect the settlement of instructions by other entities in the holding chain of securities, as these do not qualify as internalised settlement. Similarly, a settlement internaliser should not report transactions executed on a trading venue and transferred by the trading venue to a central counterparty (CCP) for clearing or to a CSD for settlement.”
Content and format of the reporting
RTS on internalised settlement (EU) 2017/391 specifies the content of the reporting on internalised settlements and Commission Implementing Regulation (EU) 2017/393 (ITS on internalised settlement) lays down the templates and procedures for the reporting and transmission of information on internalised settlements.
The multidimensional STT-reporting includes – among other things, the following data (information on failed settlements will be compiled separately in the same manner):
- Type of financial instruments;
- Type of transactions (eg purchase or sale of securities, collateral management operations, securities lending or securities borrowing, repo etc.)
- Type of client (professional, retail);
- Each issuer CSD information.
Issues to be observed in the context of the transmission of a report
The file submitted to FIN-FSA (submission file) must be compressed into a zip file which includes an encrypted XML-format envelope (meta data and basic identification data) and a zipped and encrypted XML- report, which includes the actual data.
Figure 3. shows the conceptual schema of the internalised settlement report XSD ja Figure 4. shows the overall structure of the internalised settlement XSD.
All changes affecting the reporting obligation, incl. name of person responsible, must be separately notified to FIN-FSA at STTHelpdesk(at)fiva.fi.
Description of electronic reporting (STT reporting)
The description of electronic reporting in connection of internalised settlement reporting (STT-reporting) is used for creating and submitting internalised settlement reporting information to FIN-FSA beginning with reporting on the reporting period Q3 2019, in the beginning of October 2019.
The description highlights the technical requirements incl. the special national requirements that are not included in ESMA's technical guidance.
In addition to the reports, which accord with the ESMA descriptions, FIN-FSA requires a separate XML envelope.
See Description of electronic reporting
Figure 5. presents the transaction reporting process applicable to STT-reporting at national level
- Regulation (EU) No 909/2014 (CSDR)
- Commission Delegated Regulation (EU) 2017/391 (RTS)
- Commission Implementing Regulation (EU) 2017/393 (ITS)
- ESMA Guidelines on Internalised Settlement Reporting under Article 9 of CSDR
- Technical Guidance for Settlement Internalisers – Report Validation Rules (CSDR Article 9)
- 11 June 2019 Settlement internalisation - testing and validation