Central Securities Depository Regulation (CSDR)
A Central Securities Depository (CSD) is an institution that performs the settlement of transactions in the securities in the financial markets. CSDs also hold records of securities accounts and transactions.
The rules introduced in the CSD Regulation (CSDR) are aimed at ensuring the viability and the protection of the participants of the financial markets in the EU, by increasing the safety and efficiency of settlements.
New rules to improve the efficiency of settlements include shorter settlement periods (T+2 instead of T+3), settlement discipline measures (which include cash penalties and ‘buy-ins’ for settlement fails) and the introduction of a European passport for CSDs. The safety of CSDs is further ensured by the authorisation, recognition, supervision of CSDs on organisational and prudential requirements.
1Implementation / enforcement 10/2010 - 03/2012
2Discussion / consultation 03/2012 - 08/2014
3Implementation / enforcement 08/2014 - 12/2019
4In effect 12/2019 -
The CSDR applies to all market infrastructures involved with securities settlement. The requirement for the shorter settlement period has already become applicable, and has lowered counterparty risk and increased focus on positively affirming trade details.
Participants of CSDs will have to make sure their CSD becomes authorised under the new regime and will be mainly impacted by the introduction of mandatory buy-ins and penalties for settlement failures. Participants should ensure processes are set up to avoid penalties. Penalties proposed by ESMA are based on the asset type and liquidity of the financial instruments and vary between 1 and 0.1 basis points (for shares in a liquid market and debt instruments issued by a central bank respectively).
Most of the obligations in the CSDR are specified in level 2 measures and will enter into force upon publication of these measures. The discipline rules are expected to enter into force in Q2 2019.
European Commission: Settlement