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CSD regulation in Europe: what is it?
CSD regulation in Europe: what is it?

CSD regulation in Europe: what is it?


The Central Securities Depositories regulation (CSDR) plays a pivotal role for the harmonisation of post-trade processes and the financial markets infrastructures in the European Union (EU). In the upcoming months, we will see the entry into force of some of the standards. It is time to get familiar with them. Are you ready?

What is CSDR?

CSDR refers to the European regulation on improving securities settlement in the EU and on its central securities depositories (CSDs). It aims to:

  • Increase the safety and efficiency of securities settlement and settlement infrastructures in the EU
  • Harmonise the way CSDs across EU operate
  • Enhance the legal and operational conditions for cross-border settlement

CSDR affects market participants directly since it provides for harmonisation of certain aspects of the settlement cycle and covers, among others, a new and very wide-ranging settlement discipline. It also indirectly impacts CSD participants as a result of the requirements imposed on these market infrastructures.

What are the CSDR main provisions?

CSDR provides for:

  • Shorter settlement periods
  • Settlement discipline measures (mandatory cash penalties and ‘buy-ins’ for settlement fails)
  • An obligation regarding dematerialisation for most securities
  • Strict prudential and conduct of business rules for CSDs
  • Strict access rights to CSD services
  • Increased prudential and supervisory requirements for CSDs and other institutions providing banking services ancillary to securities settlement

Read more: Frequently asked questions (July 2014, European Commission): click here

When will CSDR provisions be implemented?

Each European CSD, including the ICSDs, was required to apply to its local competent authority for reauthorisation in September 2017. All European CSDs are now engaged with their local competent authorities, which are assessing the completeness of their applications. CSDs will be authorised within 6 months of their application being deemed complete by their local authorities. From the authorisation date, the new CSD requirements will enter into force.

The list of CSDs authorised so far (5 CSDs in September 2018) can be found in the ESMA website.

ESMA CSD register: here

When will CSDR provisions be implemented?

Areas of impact, as soon as a CSD is re-authorised

Record keeping and reconciliation

Article 29 requires CSDs to maintain, for a period of at least 10 years, all their records on the services and activities, so as to enable the competent authority to monitor the compliance with the requirements under this regulation.

  • CSD participants must reconcile their records with the information received from the CSD on a daily basis.
  • A CSD may need to suspend an ISIN for settlement in case of unresolved reconciliation error. While we expect this situation to be exceptional, market participants need to be prepared when impacted by such suspension.

In addition, ESMA has published the relevant technical standards (article 18 and article 53-58), which include:

  • Transactions/settlement instructions records that a CSD needs to maintain, including:
  • Type of settlement instructions: free of payment (FOP), versus payment (DVP and RVP) and payment free of delivery (PFOD)
  • Type of transaction (purchases and sales, collateral, SLAB, repo and other)
  • All market participants will have to systematically provide these transactions details. It will require new operational processes for many financial institutions, in order to avoid huge impacts on reporting and on settlement penalties and buy-ins.

Protection of securities of participants and those of their participants  depending on client access to markets

Article 38 places new obligations on a CSD’s participants (such as BNP Paribas Securities Services for our clients in an agent bank model or for a client itself in an account operator model) in order to

  • Offer their clients at least the choice between omnibus segregation and individual client segregation
  • And inform them of the costs, level of protection and risks associated with each option

Operational risk

According to Article 45, CSDs have obligations to monitor operational risks that may be posed by key participants. They are therefore required to identify their key participants and, potentially, the underlying clients of those key participants.

Areas of impact - starting from July 2019

Internalised Settlement Reporting

Article 9 requires the settlement “internaliser” to report, to the competent authorities of its place of establishment, on a quarterly basis, the aggregated volume and value of all securities transactions that it settles outside securities settlement system. ESMA has published technical standards to establish the forms, templates and procedures for the reporting and the transmission to the relevant competent authorities.

Settlement internalisation process flow

Source: Association for Financial Markets in Europe. AFME response on internalised reporting

Impacts applicable starting from September 2020

Settlement discipline regime

CSDR will require participants to settle their transactions on intended settlement date and requires CSDs to take measures to:

  • Encourage the timely settlement of transactions by its participants
  • Monitor settlement fails and provide regular reporting to the competent authorities
  • Prevent and address settlement fails through mandatory cash penalties and buy-in mechanism

From a practical point of view, it means a mandatory settlement regime across a wide range of securities.


CSDs will implement a penalty mechanism for settlement fails which will serve as a deterrent for participants that cause settlement fails. Calculation of cash penalties will be performed on a daily basis. The calculation will be done, for each business day a transaction fails to settle after its intended settlement date, up to the moment of the actual settlement date or until the end of the buy-in process.


CSDR requirements include a mandatory buy-in process on any financial instrument which has not been delivered within a set period of the intended settlement date. This period depends on the asset type and liquidity of the relevant financial instrument i.e. up to four days for liquid securities, seven days for illiquid securities and up to fifteen days for transactions on SME growth markets.

CSDs will not have an active role in the buy-in execution. The exclusive responsibility for buy-ins remains at the trading level and with the trading parties or the central counterparties (CCPs) in case of cleared trades. The CSD will report buy-ins based on information received from the relevant trading venue or CCPs.

Read more: ESMA regulatory technical standards on settlement discipline (May 2018)


BNP Paribas is closely monitoring the CSD re-authorisation with the European CSDs and participating to the main market associations in all the countries impacted by the regulation. Our local experts are analysing the main features of the regulation and adapting our services to minimise the impacts on our clients.

This paper describes the main features of CSDR and the impact on our clients as we see them in October 2018. It reflects our general interpretation of the regulation, and should not be relied on as a compliance, or formal implementation.

Read more

The CSDR handbook (June 2018)


August 2014: CSDR published in the Official Journal

17 September 2014: CSD regulation entered into force

March 2017: regulatory technical standards (RTS) for CSD requirements and settlement internalisation reporting published

September 2017: CSDs’ filling for CSDR authorisation

May 2018: regulatory technical standards (RTS) for settlement discipline published

March 2019: Entry into force of internalised settlement reporting obligations

September 2020: entry into force of settlement discipline rules

January 2023: any new security shall be issued in book entry

January 2025: all securities shall be in book entry

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