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CSD Regulation

Central Securities Depositories (CSDs) are Financial Market Infrastructures (FMIs) alongside Trading Venues, Central Counterparties (CCPs), Trade Repositories and Payment Systems. Like CCPs they contribute to a large degree in maintaining the financial stability.

CSDR, following MIFID2/MIFIR (covering Trading Venues) and EMIR (focused on CCPs), addresses the CSD’s topic in Europe by giving the latter a regulatory framework in which they can exercise their function meanwhile requiring several measures to improve the settlement and to reinforce the investor protection.

CSDR is built on four main pillars:

1. Infrastructure, by laying down a unified and harmonised framework for all European CSDs
  • Defining a CSD, its role and its responsibilities
  • Establishing a set of common requirements for CSDs operating securities settlement systems
  • Freeing the choice of an issuer CSD for issuers
  • Requiring CSDs to have a recovery plan
2. Strengthening the Investor Protection
  • Dematerialization or immobilisation of securities, book-entry form for transferable securities
  • Segregation of investors’ assets
3.Improvement of the settlement
  • Reduction of the settlement cycle
  • Reinforcement of the obligation to settle transactions in transferable securities, money-market instruments, units in collective investment undertakings or emission allowances on the date agreed between the parties (also called: ISD for Intended Settlement Date)
  • Imposition of a settlement disciplines regime: set of several measures aiming to prevent and address settlement fails and thus have a transaction be fully settled on ISD
4. Transparency
  • Setting obligations of reporting to national competent authorities and ESMA
  • Identification of the issuing entities via the use of LEI (Legal Entity Identifier)

 

Reference texts:

Level 1 regulation of 23 July 2014
Level 2 acts (except Settlement Disciplines Regime) of 11 November 2016
Level 2 acts (Settlement Disciplines Regime) of 25 May 2018 with a compliance date on 13 Sep 2020

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