Central Securities Depository Regulation (CSDR)
The Central Securities Depository Regulation (CSDR) regulates the legal aspects of securities settlement. It also harmonises the requirements and supervision of all CSDs in Europe.
The CSDR sets rules for central securities depository activity, in particular the securities settlement service.
CSDR is central to harmonising post-trade activities in Europe.
It aims to:
- increase the safety, reliability and efficiency of CSDs
- ensure that CSDs are subject to a common regulatory framework in the EU
- harmonise the legal aspects related to the settlement of securities
- create a level playing field among CSDs
- ensure prompt competition and connection between systems
- introduce a standard framework for dealing with settlement fails
What CSDR means for our clients
CSDR is relevant for all financial market participants in Europe. There are measures that all clients should be aware of:
CSDs must offer two levels of segregation. Customers can choose between omnibus client segregation and individual client segregation. Individual client segregation may also allow for accounts at the level of end-investor, often referred to as the third level of segregation.
Segregated accounts provide the ability to:
- create third-party accounts
- separate client activities
- ensure suitable asset protection
A LEI code is needed under CSDR, EMIR and MiFID legislation, to support the harmonisation of data collection and reporting.
Clients will need to get a LEI code and share it with their CSD making sure their LEI is valid and renewed every year.
As an issuer CSD, we have to store the LEI of each client.
Settlement Discipline Regime (SDR)
CSDR imposes measures to reduce settlement fails and endorses straight-through processing (STP). The goal is to support high settlement rates.
The SDR sets daily cash penalties and mandatory buy-ins for trades that fail in the settlement process.
See the main CSDR regulations below.
Regulatory Technical Standards (RTS)
RTS are a set of technical definitions, procedure, etc. that, once endorsed by the European Commission, need to be met by all parties. RTS covers topics such as data security and legal accountability.
EU legislation commonly provides for technical definitions, procedures etc. not to be set in the primary, framework legislation (Directive or Regulation) but in these Standards recommended to the Commission by European Supervisory Authorities such as the European Banking Authority or the European Securities and Markets Authority and adopted by the Commission.
Implementing Technical Standards (ITS)
ITS aim at implementing uniform reporting requirements which are necessary to ensure fair conditions of competition between comparable groups of credit institutions and investment firms.
In order to contribute to the objective of ensuring supervisory convergence, and a level playing field with regard to the implementation of CSDR and of the related Level 2 measures, ESMA might issue Guidelines, Recommendations, Opinions and Questions and Answers (Q&As).