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Central securities depositories (CSDs)

Central Securities Depositories (CSDs) are critical to the post-trade infrastructure, ensuring the safe and efficient settlement of securities transactions in Europe. The EU has implemented regulations to enhance the safety and efficiency of these processes, ultimately strengthening the broader financial system.

Securities Settlement

  • After a trade is executed, a series of processes, known as settlement, occur to finalize the transaction. This involves the delivery of securities to the buyer and cash to the seller, often a few days after the trade. Settlement across borders presents higher risks and costs for investors within one country. To harmonise rules in this area the EU has adopted a Regulation on CSDs (CSDR).

Role of CSDs in Securities Settlement

  • CSDs operate the infrastructure that allows for the registration, safekeeping, and settlement of securities. They track securities issuance and ownership changes, playing a crucial role in the financial markets.

CSD Regulation (CSDR)

  • The Central Securities Depositories Regulation harmonizes rules across the EU to enhance settlement safety and efficiency. Key features include shorter settlement periods, penalties for settlement fails, and strict requirements for CSDs. The regulation also introduces a passport system for CSDs to offer services across the EU and increased supervisory requirements.

CSDR Review and Proposed Changes

  • The 2021 CSDR Review review concluded that CSDR broadly meets its objectives but identified areas for improvement. In March 2022, the European Commission proposed changes to further enhance the efficiency of the EU's settlement markets while safeguarding financial stability. These changes aim to reduce compliance costs, facilitate cross-border services, and improve supervision.

Key Documents