The European Securities and Markets Authority (ESMA) has published its Final Report on the Technical Advice for the European Commission on the Central Securities Depositories Regulation (CSDR) penalty mechanism. The report aims to improve settlement efficiency in the EU, particularly in light of a potential move to T+1. ESMA's advice focuses on three main aspects: alternative parameters for calculating penalties due to lack of cash, the treatment of historical reference prices for late matching fail penalties, and the design and level of penalty rates for each asset class. ESMA proposes maintaining the current penalty mechanism design and introducing a moderate increase in penalty rates, targeting most asset classes. The penalty mechanism has improved settlement efficiency in the EU since its application in February 2022. ESMA believes that cash penalties can continue to have a positive impact on settlement efficiency. The European Commission will consider ESMA's Technical Advice when amending the Commission Delegated Regulation. The revised penalty mechanism will become applicable after the amended regulation is adopted and published in the EU Official Journal. The European Parliament and the Council of the EU will scrutinize the amended regulation before its adoption. The report is part of ESMA's efforts to promote efficient and stable financial markets in the EU.