The European Securities and Markets Authority (ESMA) recently published a Final Report (Report) containing technical advice under the E.U. regulation on improving securities settlement in the European Union and on central securities depositories (CSD Regulation).  The Report addresses two areas relating to delegated acts required under the CSD Regulation: penalties for settlement failures and the importance of a CSD.  This article provides the background to the Report and examines ESMA’s advice on penalties for settlement failures.  The advice is important for hedge fund managers and other participants in the E.U. securities market because penalties are meant to deter settlement failures and encourage prompt resolution of failures by market participants, thereby improving settlement efficiency within the E.U.  Implementing a cash penalty system will also affect the bottom line for market participants, stemming from the implementation, operation and monitoring of the system by CSDs and regulators, as well as payment of the penalties.  For more on CSDs, see “EMIR Offers Three Models of Asset Segregation to Fund Managers That Trade OTC Derivatives,” Hedge Fund Law Report, Vol. 8, No. 15 (Apr. 16, 2015).