Commission Delegated Regulation (EU) 2018/1229Show full title

CHAPTER III U.K. Measures to address settlement fails

Section I U.K. Monitoring settlement fails

Article 13 U.K. Details of the system monitoring settlement fails

1. CSDs shall establish a system that enables them to monitor the number and value of settlement fails for every intended settlement date, including the length of each settlement fail expressed in business days. That system shall, for each settlement fail, collect the following information:

(a) the reason for the settlement fail, based on the information available to the CSD;

(b) any settlement restrictions such as the reservation, blocking or earmarking of financial instruments or cash that make those financial instruments or cash unavailable for settlement;

(c) the type of financial instrument, within the following categories, affected by the settlement fail:

(i)

transferable securities as defined in point (a) of Article 4(1)(44) of Directive 2014/65/EU;

(ii)

sovereign debt as defined in Article 4(1)(61) of Directive 2014/65/EU;

(iii)

transferable securities as defined in point (b) of Article 4(1)(44) of Directive 2014/65/EU, other than sovereign debt referred to in point (ii);

(iv)

transferable securities as defined in point (c) of Article 4(1)(44) of Directive 2014/65/EU;

(v)

exchange-traded funds (ETFs);

(vi)

units in collective investment undertakings, other than ETFs;

(vii)

money-market instruments, other than sovereign debt referred to in point (ii);

(viii)

emission allowances;

(ix)

other financial instruments;

(d) the type of transaction, within the following categories, affected by the settlement fail:

(i)

purchase or sale of financial instruments;

(ii)

collateral management operations;

(iii)

securities lending/borrowing operations;

(iv)

repurchase transactions;

(v)

other transactions, which can be identified by more granular ISO codes as provided by the CSD;

(e) the place of trading and of clearing of the affected financial instruments, where applicable;

(f) the type of settlement instruction, within the following categories, affected by the settlement fail:

(i)

an intra-CSD settlement instruction, where the failing and the receiving parties are both participants in the same securities settlement system; or

(ii)

a cross-CSD settlement instruction, where the failing and the receiving parties are participants in two different securities settlement systems or one of the participants is a CSD;

(g) the type of settlement instruction, within the following categories, affected by the settlement fail:

(i)

FoP settlement instructions that consist of deliver free of payment (‘DFP’) and receive free of payment (‘RFP’) settlement instructions;

(ii)

delivery versus payment (‘DVP’) and receive versus payment (‘RVP’) settlement instructions;

(iii)

delivery with payment (‘DWP’) and receive with payment (‘RWP’) settlement instructions; or

(iv)

payment free of delivery (‘PFOD’) settlement instructions that consist of debiting payment free of delivery (‘DPFOD’) and crediting payment free of delivery (‘CPFOD’) settlement instructions;

(h) the type of securities accounts connected to the settlement fail, including:

(i)

a participant's own account;

(ii)

a participant's client individual account;

(iii)

a participant's client's omnibus account;

(i) the currency in which the settlement instructions are denominated.

2. CSDs shall establish working arrangements with the participants referred to in fields 17 and 18 of Table 1 in Annex I which have the most significant impact on their securities settlement systems and, where applicable, with relevant CCPs and trading venues to analyse the main reasons for the settlement fails.

Article 14 U.K. Reporting settlement fails

1. CSDs shall communicate the information referred to in Annex I to the competent authority and the relevant authorities on a monthly basis and by close of business on the fifth business day of the following month.

That information shall include the relevant values in EUR. Any value conversion into EUR shall be carried out using the official exchange rate of the ECB of the last day of the reporting period where that official exchange rate of the ECB is available.

CSDs shall report more frequently and provide additional information on settlement fails if so requested by the competent authority.

2. By 20 January of each year, CSDs shall report to the competent authority and the relevant authorities the information referred to in Annex II, including the measures planned or taken by CSDs and their participants to improve the settlement efficiency of the security settlement systems it operates.

CSDs shall regularly monitor the application of the measures referred to in the first subparagraph and shall provide the competent authority and the relevant authorities, upon request, with any relevant findings resulting from such monitoring.

3. The information referred to in paragraphs 1 and 2 shall be provided in a machine-readable format.

4. The value of settlement instructions referred to in Annexes I to III shall be calculated as follows:

(a) in the case of settlement instructions against payment, the settlement amount of the cash leg;

(b) in the case of FoP settlement instructions, the market value of the financial instruments referred to in Article 32(3) or, where not available, the nominal value of the financial instruments.

Article 15 U.K. Public disclosure on settlement fails

CSDs shall publish the information set out in Annex III for the securities settlement system it operates on their website for free, including the relevant values in EUR.

Any value conversion into EUR shall be carried out using the official exchange rate of the ECB of the last day of the reporting period where that official exchange rate of the ECB is available.

The information referred to in the first subparagraph shall be published annually and in a language customary in the sphere of international finance and shall be machine-readable.

Section 2 U.K. Cash penalties

Article 16 U.K. Calculation and application of cash penalties

1. The cash penalties referred to in Article 7(2) of Regulation (EU) No 909/2014 shall be calculated and applied by CSDs for each settlement instruction that fails to settle.

The calculation referred to in the first subparagraph shall include settlement instructions that have been put on hold by a participant.

Where matching is required pursuant to Article 5(2), cash penalties shall only be applied to matched settlement instructions.

2. Cash penalties shall be calculated and applied at the end of each business day where the settlement instruction fails to settle.

3. Where a settlement instruction has been entered into the securities settlement system or has been matched after the intended settlement date, cash penalties shall be calculated and applied as from the intended settlement date.

Where new settlement instructions are entered into the securities settlement system for any non-delivered financial instruments in accordance with Article 27(10), Article 29(11) or Article 31(11), cash penalties shall apply to the new settlement instructions from the day those instructions are entered into the securities settlement system.

Where settlement instructions have been matched after the intended settlement date, cash penalties for the period between the intended settlement date and the business day prior to the day on which matching has taken place shall be paid by the last participant who has entered or modified the relevant settlement instruction in the securities settlement system.

4. CSDs shall provide each relevant participant with the details of the calculation of the penalties for each failed settlement instruction on a daily basis, including details on the account to which each failed settlement instruction refers.

Article 17 U.K. Collection and distribution of cash penalties

1. CSDs shall charge and collect on at least a monthly basis the net amount of cash penalties to be paid by each failing participant.

Cash penalties shall be deposited into a dedicated cash account.

2. CSDs shall distribute on at least a monthly basis the net amount of cash penalties referred to in paragraph 1 to receiving participants affected by settlement fails.

Article 18 U.K. Costs of the penalty mechanism

1. CSDs shall not use cash penalties to cover costs related to the penalty mechanism.

2. CSDs shall disclose, in detail, the amount of the costs referred to in paragraph 1 to participants.

3. CSDs shall charge participants separately for the costs of the penalty mechanism. Those costs shall not be charged on the basis of gross penalties applied to each participant.

Article 19 U.K. Penalty mechanism where the participant is a CCP

Where the failing or the receiving participant is a CCP, CSDs shall ensure the following:

(a)

that CCPs are provided with the calculation of the cash penalties for the failed settlement instructions submitted by those CCPs;

(b)

that CCPs collect the cash penalties referred to in point (a) from the clearing members that caused the settlement fails;

(c)

that CCPs distributes the cash penalties referred to in point (b) to the clearing members that are affected by the settlement fails;

(d)

that CCPs report to the CSD on the penalties that they have collected and distributed, on a monthly basis.

Article 20 U.K. CSDs that use a common settlement infrastructure

CSDs that use a common settlement infrastructure, including where some of their services or activities have been outsourced as referred to in Article 30(5) of Regulation (EU) No 909/2014, shall jointly establish the penalty mechanism referred to in Article 7(2) of Regulation (EU) No 909/2014 and jointly manage the modalities for the calculation, application, collection and distribution of cash penalties in accordance with this Regulation.

Section 3 U.K. Details of the buy-in process

Sub-section 1 U.K. General

Article 21 U.K. Buy-in not possible

A buy-in shall only be considered not possible where:

(a)

the relevant financial instruments no longer exist;

(b)

for transactions not cleared by a CCP, the failing trading venue member or the failing trading party is subject to insolvency proceedings.

For the purposes of point (b), insolvency proceeding shall mean any collective measure provided for in the law of a Member State, or a third country, either to wind up the trading venue member or trading party or to reorganise it, where such measure involves the suspension or imposition of limitations on transfers or payments.

Article 22 U.K. Ineffective buy-in process

1. For the purposes of point (b) of Article 7(4) of Regulation (EU) No 909/2014, the following operations shall be considered to be composed of several transactions:

(a) operations where one party sells financial instruments for cash (‘first transaction’), with a commitment of the other party to sell equivalent financial instruments to the first party for a price that is determined or determinable (‘second transaction’);

(b) operations where one party transfers financial instruments to another party (‘first transaction’), with a commitment of that other party to return equivalent financial instruments to the first party (‘second transaction’).

2. Where paragraph 1 applies, the buy-in process shall be considered ineffective where the intended settlement date of the second transaction is set within 30 business days after the intended settlement date of the first transaction.

Article 23 U.K. Application of partial settlement

1. Where on the last business day of the extension period referred to in Article 7(3) of Regulation (EU) No 909/2014, some of the relevant financial instruments are available for delivery to the receiving participant, the receiving and failing clearing members, trading venue members or trading parties, as applicable, shall partially settle the initial settlement instruction unless the conditions set out in Article 12(1) of this Regulation are fulfilled.

2. The first subparagraph shall not apply where the relevant settlement instruction is put on hold in accordance with Article 8.

Article 24 U.K. Buy-in agent

A buy-in agent shall not have any conflict of interest in the execution of a buy-in and shall execute the buy-in on the terms most favourable to the failing clearing member, trading venue member or trading party, as applicable, in accordance with Article 27 of Directive 2014/65/EU.

Article 25 U.K. Contractual arrangements and procedures

1. Parties in the settlement chain shall establish contractual arrangements with their relevant counterparties that incorporate the buy-in process requirements specified in paragraph 2 and the procedures specified in paragraph 3.

2. The contractual arrangements referred to in paragraph 1 shall fully incorporate the applicable requirements set out in Article 7 of Regulation (EU) No 909/2014 and Articles 26 to 38 of this Regulation. Each party in the settlement chain shall ensure that the contractual arrangements established with its relevant counterparties are enforceable in all relevant jurisdictions.

3. CCPs, clearing members, trading venue members or trading parties shall establish the necessary procedures to execute the buy-in, pay the cash compensation, the price difference and the buy-in costs within the required timeframes. The contractual arrangements and the procedures referred to in this Article shall include the necessary provisions to ensure that the relevant parties in the settlement chain receive the information required to exercise their rights and obligations in accordance with the timeframes specified in Articles 26 to 35 of this Regulation.

4. The participants shall establish the necessary contractual arrangements with their clients to ensure that the buy-in requirements set out in this Regulation are enforceable in all the jurisdictions to which parties in the settlement chain belong.

5. The bought-in financial instruments may only be considered as delivered for the purposes of Article 27, Article 29 and Article 31 where those instruments have been received in the securities settlement system operated by the CSD by the receiving participants acting on behalf of the CCP, the receiving clearing members, trading venue members or trading parties.

6. The cash compensation referred to in Article 33 and the price difference referred to in Article 35(1) may only be considered as paid where the cash payment has been received by the receiving participants acting on behalf of the CCP, the receiving clearing members, trading venue members or trading parties.

Sub-section 2 U.K. Buy-in process for transactions cleared by a CCP

Article 26 U.K. Initial verification

1. On the business day following the expiry of the extension period, CCPs shall verify whether a buy-in is possible in accordance with Article 21(a) in relation to any of the transactions it has cleared.

2. Where a buy-in is not possible pursuant to Article 21(a), the CCP shall notify the failing clearing member of the cash compensation amount calculated in accordance with Article 32. The cash compensation shall be paid in accordance with Article 33(1).

3. Where a buy-in is possible, Article 27 shall apply.

Article 27 U.K. Buy-in procedure and notifications

1. Where a buy-in is possible, CCPs shall launch an auction or appoint a buy-in agent on the business day following the expiry of the extension period and notify the failing and receiving clearing members thereof.

2. Upon receipt of the notification referred to in paragraph 1, the failing clearing member shall ensure that any relevant settlement instruction relating to the settlement fail is put on hold.

3. Upon receipt of the notification referred to in paragraph 1, the failing clearing member may only deliver the financial instruments as follows:

(a) to the buy-in agent where the buy-in agent gives prior consent;

(b) to the CCP where the auction has been awarded to that failing clearing member.

Prior to receipt of the notification referred to in paragraph 1, the failing clearing member may still deliver the financial instruments directly to the CCP.

4. The CCP shall notify the results of the buy-in to the failing and receiving clearing members and to the relevant CSD at the latest on the last business day of the period determined in accordance with Article 37.

5. Where the buy-in is successful in part or in full, the notification referred to in paragraph 4 shall include the quantity and price of the bought-in financial instruments.

6. Where the buy-in fails in part or in full, the notification referred to in paragraph 4 shall include the cash compensation amount calculated in accordance with Article 32 unless that notification specifies that the execution of the buy-in is deferred.

7. Where the execution of the buy-in is deferred, the CCP shall notify the results of that deferred buy-in to the failing and receiving clearing members and to the relevant CSD at the latest on the last business day of the deferral period referred to in Article 38.

8. Where the buy-in referred to in paragraph 7 is successful in part or in full, the notification referred to in that paragraph shall include the quantity and price of the bought-in financial instruments.

9. Where the buy-in referred to in paragraph 7 fails in part or in full, the notification referred to in that paragraph shall include the cash compensation amount calculated in accordance with Article 32.

10. The CCP shall accept and pay for the bought-in financial instruments referred to in paragraphs 5 and 8 and ensure that the following is carried out at the end of each business day on which the CCP receives those financial instruments:

(a) the bought-in financial instruments are delivered to the receiving clearing members;

(b) the settlement instructions relating to the settlement fail are cancelled;

(c) new settlement instructions are entered into the securities settlement system for any non-delivered financial instruments and the CSD receives the information necessary to identify such new settlement instructions accordingly.

11. The CCP shall ensure that the settlement instructions relating to the settlement fail are cancelled upon payment of the cash compensation referred to in paragraphs 6 and 9 or, at the latest, on the second business day after the notification referred to therein.

Sub-section 3 U.K. Buy-in process for transactions not cleared by a CCP and executed on a trading venue

Article 28 U.K. Initial verification

1. For transactions not cleared by CCPs and executed on a trading venue, receiving participants, through their clients, shall inform receiving trading venue members of any settlement fails without undue delay.

2. The trading venue shall disclose to the receiving trading venue member the identity of the failing trading venue members upon request. On the business day following the expiry of the extension period, the receiving trading venue member shall verify whether a buy-in is possible in accordance with Article 21.

3. Where a buy-in is not possible pursuant to Article 21, the receiving trading venue member shall notify the failing trading venue member of the results of the verification and the cash compensation amount calculated in accordance with Article 32. The cash compensation shall be paid in accordance with Article 33(2).

4. Where a buy-in is possible, Article 29 shall apply.

Article 29 U.K. Buy-in procedure and notifications

1. Where a buy-in is possible, the receiving trading venue member shall appoint a buy-in agent on the business day following the expiry of the extension period and notify the failing trading venue member thereof.

2. Upon receipt of the notification referred to in paragraph 1, the failing trading venue member shall ensure that any relevant settlement instruction relating to the settlement fail is put on hold.

3. Upon receipt of the notification referred to in paragraph 1, the failing trading venue member may only deliver the financial instruments to the buy-in agent where the buy-in agent gives prior consent.

Prior to receipt of the notification referred to in paragraph 1, the failing trading venue member may still deliver the financial instruments directly to the receiving trading venue member.

4. The receiving trading venue member shall notify the results of the buy-in to the failing trading venue member and to the relevant CSD at the latest on the last business day of the period determined in accordance with Article 37.

5. Where the buy-in is successful in part or in full, the notification referred to in paragraph 4 shall include the quantity and price of the bought-in financial instruments.

6. Where the buy-in fails in part or in full, the notification referred to in paragraph 4 shall include the cash compensation amount calculated in accordance with Article 32 unless that notification specifies that the execution of the buy-in is deferred.

7. Where the execution of the buy-in is deferred, the receiving trading venue member shall notify the results of that deferred buy-in to the failing trading venue member and to the relevant CSD at the latest on the last business day of the deferral period referred to in Article 38.

8. Where the buy-in referred to in paragraph 7 is successful in part or in full, the notification referred to in that paragraph shall include the quantity and price of the bought-in financial instruments.

9. Where the buy-in referred to in paragraph 7 fails in part or in full, the notification referred to in that paragraph shall include the cash compensation amount calculated in accordance with Article 32.

10. The receiving trading venue member shall accept and pay for the bought-in financial instruments referred to in paragraphs 5 and 8.

11. The receiving and the failing trading venue members shall ensure that the following is carried out at the end of each business day on which the receiving trading venue member receives the instruments referred to in paragraphs 5 and 8:

(a) the settlement instructions relating to the settlement fail are cancelled;

(b) the new settlement instructions are entered into the securities settlement system for any non-delivered financial instruments and the CSD receives the information necessary to identify such new settlement instructions accordingly.

12. The failing trading venue member shall pay the cash compensation referred to in paragraphs 6 and 9 in accordance with Article 33(2).

13. The failing and receiving trading venue members shall ensure that the relevant settlement instructions relating to the settlement fail are cancelled upon payment of the cash compensation referred to in paragraphs 6 and 9 or at the latest on the second business day after the notification of the amount of cash compensation.

Sub-section 4 U.K. Buy-in process for transactions not cleared by a CCP and not executed on a trading venue

Article 30 U.K. Initial verification

1. For transactions not cleared by a CCP and not executed on a trading venue, receiving participants, through their clients, shall inform receiving trading parties of any settlement fails without undue delay.

2. On the business day following the expiry of the extension period, receiving trading parties shall verify whether a buy-in is possible in accordance with Article 21.

3. Where buy-in is not possible pursuant to Article 21, receiving trading parties shall notify the failing trading party of the results of the verification and the cash compensation amount calculated in accordance with Article 32. The cash compensation shall be paid in accordance with Article 33(2).

4. Where the buy-in is possible, Article 31 shall apply.

Article 31 U.K. Buy-in procedure and notifications

1. Where the buy-in is possible, the receiving trading party shall appoint a buy-in agent on the business day following the expiry of the extension period and notify the failing trading party thereof.

2. Upon receipt of the notification referred to in paragraph 1, the failing trading party shall ensure that any relevant settlement instruction relating to the settlement fail is put on hold.

3. Upon receipt of the notification referred to in paragraph 1, the failing trading party may only deliver the financial instruments to the buy-in agent where the buy-in agent gives its prior consent.

Prior to the receipt of the notification referred to in paragraph 1, the failing trading party may still deliver the financial instruments directly to the receiving trading party.

4. The receiving trading party shall notify the results of the buy-in to the failing trading party at the latest on the last business day of the applicable period determined in accordance with Article 37. The receiving trading party shall ensure that the relevant CSD receives the information notified without undue delay.

5. Where the buy-in is successful in part or in full, the notification referred to in paragraph 4 shall include the quantity and price of the bought-in financial instruments.

6. Where the buy-in fails in part or in full, the notification referred to in paragraph 4 shall include the cash compensation amount calculated in accordance with Article 32, unless that notification specifies that the execution of the buy-in is deferred.

7. Where the execution of the buy-in is deferred, the receiving trading party shall notify the results of that deferred buy-in to the failing trading party at the latest on the last business day of the deferral period referred to in Article 38. The receiving trading party shall ensure that the relevant CSD receives the information notified without undue delay.

8. Where the buy-in referred to in paragraph 7 is successful in part or in full, the notification referred to in that paragraph shall include the quantity and price of the bought-in financial instruments.

9. Where the buy-in referred to in paragraph 7 fails in part or in full, the notification referred to in that paragraph shall include the cash compensation amount calculated in accordance with Article 32.

10. The receiving trading party shall accept and pay for the bought-in financial instruments referred to in paragraphs 5 and 8.

11. The receiving and the failing trading parties shall ensure that the following is carried out at the end of each business day on which the receiving trading party receives the instruments referred to in paragraphs 5 and 8:

(a) the settlement instructions relating to the settlement fail are cancelled;

(b) the new settlement instructions are entered into the securities settlement system for any non-delivered financial instruments and the CSD receives the information necessary to identify such new settlement instructions accordingly.

12. The failing trading party shall pay the cash compensation referred to in paragraphs 6 and 9 in accordance with Article 33(3).

13. The failing and receiving trading parties shall ensure that the relevant settlement instructions relating to the settlement fail are cancelled upon payment of the cash compensation referred to in paragraphs 6 and 9 or at the latest on the second business day after the notification of the amount of that cash compensation.

Sub-section 5 U.K. Calculation and payment of the cash compensation, of the buy-in costs and related price difference

Article 32 U.K. Calculation of the cash compensation

1. The cash compensation to be paid pursuant to Article 7(7) of Regulation (EU) No 909/2014 shall be calculated in either of the following ways:

(a) for settlement instructions against payment, the difference between the market value of the relevant financial instruments on the business day before the payment of the cash compensation and the settlement amount included in the failed settlement instruction where that settlement amount is lower than that market value;

(b) for settlement instructions free of payment, the difference between the market value of the relevant financial instruments on the business day before the payment of the cash compensation and the market value of those financial instruments on the day of their trade, where the market value of those financial instruments on the day of their trade is lower than on the business day before the payment of the cash compensation.

2. Where not already included in the market value of the financial instrument, the cash compensation to be paid pursuant to Article 7(7) of Regulation (EU) No 909/2014 shall include a component reflecting exchange rates variation, as well as corporate entitlements and accrued interest.

3. The market value referred to in paragraph 1 shall be determined as follows:

(a) for financial instruments referred to in Article 3(1) of Regulation (EU) No 600/2014 of the European Parliament and of the Council(1) admitted to trading on a trading venue within the Union, the value determined on the basis of the closing price of the most relevant market in terms of liquidity referred to in Article 4(6)(b) of that Regulation;

(b) for financial instruments admitted to trading on a trading venue within the Union other than those referred to in point (a), the value determined on the basis of the closing price of the trading venue within the Union with the highest turnover;

(c) for financial instruments other than those referred to in points (a), and (b), the value determined on the basis of a price calculated using a pre-determined methodology approved by the competent authority of the CSD that refers to criteria related to market data, including market prices available across trading venues or investment firms.

4. The market value referred to in paragraph 1 and the component reflecting exchange rates variation, corporate entitlements and accrued interest, referred to in paragraph 2, shall be disclosed to clearing members, trading venue members and trading parties in a detailed breakdown.

Article 33 U.K. Payment of the cash compensation

1. For transactions cleared by a CCP, the CCP shall collect the cash compensation from the failing clearing members and pay the cash compensation to the receiving clearing members.

2. Where transactions have not been cleared by a CCP but executed on a trading venue, the failing trading venue members shall pay the cash compensation to the receiving trading venue members.

3. Where transactions have not been cleared by a CCP and have not been executed on a trading venue, the failing trading parties shall pay the cash compensation to the receiving trading parties.

Article 34 U.K. Payment of the costs of the buy-in

The amounts referred to in Article 7(8) of Regulation (EU) No 909/2014 shall be paid by the failing clearing members, failing trading venue members or failing trading parties, as applicable.

Article 35 U.K. Payment of the price difference

1. Where the price of financial instruments referred to in Article 5(1) of Regulation (EU) No 909/2014 agreed at the time of the trade is lower than the price effectively paid for those financial instruments pursuant to Articles 27(10), 29(10), and 31(10), the failing clearing members, failing trading venue members or failing trading parties shall pay the price difference to the CCP, receiving trading venue members or receiving trading parties, as applicable.

Where transactions are cleared by a CCP, the price difference referred to in the first subparagraph shall be collected from failing clearing members by the CCP and paid to the receiving clearing members.

2. Where the price of the shares agreed at the time of the trade is higher than the price effectively paid for those shares pursuant to Article 27(10), Article 29(10) and Article 31(10), the corresponding difference referred to in Article 7(6) of Regulation (EU) No 909/2014 shall be deemed paid.

Section 4 U.K. Timeframes for buy-in process

Article 36 U.K. Extension periods

In accordance with point (a) of Article 7(4) of Regulation (EU) No 909/2014, the extension period for the financial instruments referred to in Article 5(1) of Regulation (EU) No 909/2014 shall be increased from four to seven business days for all financial instruments other than shares that have a liquid market as referred to in point (b) of Article 2(1)(17) of Regulation (EU) No 600/2014.

Article 37 U.K. Timeframes for the delivery of financial instruments

Following the buy-in process, the financial instruments referred to in the first subparagraph of Article 5(1) of Regulation (EU) No 909/2014 shall be delivered to the receiving participants which are acting on behalf of the CCP, the receiving clearing members, the trading venue members or the trading parties, within the following timeframes:

(a)

four business days after the extension period referred to in Article 36 for shares that have a liquid market;

(b)

seven business days after the extension period referred to in Article 36 for financial instruments other than shares that have a liquid market;

(c)

seven business days after the extension period referred to in the second subparagraph of Article 7(3) of Regulation (EU) No 909/2014 for financial instruments traded on SME growth markets;

(d)

where shares referred to in point (a) are traded on SME growth markets, point (c) shall apply.

Article 38 U.K. Duration of deferral of the execution of a buy-in

Where the CCP, the receiving trading venue member or the receiving trading party defers the execution of the buy-in, the duration of the deferral period referred to in Article 7(7) of Regulation (EU) No 909/2014 shall be determined in accordance with the timeframes referred to in Article 37.

Section 5 U.K. Systematic delivery failure

Article 39 U.K. Consistent and systematic failure to deliver securities

1. A participant shall be considered as consistently and systematically failing to deliver in a security settlement system, as referred to in Article 7(9) of Regulation (EU) No 909/2014, where its rate of settlement efficiency, determined by reference to the number or to the value of settlement instructions, is at least 15 % lower than the rate of settlement efficiency of that securities settlement system, during at least a relevant number of days over the 12 previous months.

The relevant number of days shall be determined for each participant as 10 % of the number of days of activity of that participant in the security settlement system over the 12 previous months.

2. When calculating a participant's rate of settlement efficiency, exclusive reference shall be made to settlement fails caused by that participant.

Section 6 U.K. Settlement information

Article 40 U.K. Settlement information for CCPs and trading venues

The settlement information referred to in the second subparagraph of Article 7(10) of Regulation (EU) No 909/2014 shall include the identification of the relevant transactions, of the participants and of the relevant settlement instructions. That information shall be based on the information in the securities settlement system the CSD operates.

Article 41 U.K. Settlement information in the absence of direct transaction feed from the trading venue

For transactions executed on a trading venue which are not cleared by a CCP, and in the absence of a direct transaction feed from the trading venue to the CSD, participants shall identify the trading venue and the transactions in their settlement instructions. In the absence of such information, CSDs shall consider the transactions as not having been executed on a trading venue.

(1)

Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (OJ L 173, 12.6.2014, p. 84).