Central Securities Depositories Regulation (CSDR) – regulation memo

The Central Securities Depositories Regulation applies to European Central Securities Depositaries (CSDs), their participants, and to securities settlement systems in the European Union (EU).

About CSDR

Its objective is to introduce a European regime governing various issues related to Central Securities Depositories, including:

  • Rules on the authorisation, supervision and passporting of CSDs as well as minimum organisational requirements for them
  • Conditions under which they may provide banking services
  • Minimal harmonised rules governing securities settlement and settlement discipline
  • Internalised settlement

The regulation was published in the Official Journal in August 2014 and is gradually entering into force. The authorisation of CSDs in Q1-Q2 2018 was a major step in its effective implementation. In March 2017, the EU Commission published Regulatory Standards on: (i) authorisation and supervision of CSDs; (ii) prudential requirements for CSDs; (iii) reporting of internalised settlement; and (iv) cash penalties.


The regulation contains rules on dematerialisation of securities and on securities settlement systems. It applies to:

  • CSDs, i.e. entities that operate a Securities Settlement System and accept issuance from the issuer and/or hold securities at a centralised level
  • Issuers that issue securities in EU CSDs
  • Participants to CSDs
  • Banks that offer banking services to CSDs

Industry implications

The CSDR requirements provide detailed legislative provisions on:

  • Settlement: harmonisation of settlement cycles to T+2; dematerialisation of issuances by 2020 and entry into force of level 2 legislation; harmonisation of settlement discipline rules
  • Central Securities Depositories: provisions on internal organisation including user committees, board members, minimum obligations such as reconciliation, acceptance of issuances from issuers, fair and open access to CSDs
  • Banking services: conditions under which CSDs may provide banking services or use banks
  • Intermediaries: disclosure of settlement internalisation and use of segregated accounts under certain conditions

CSDR could have far-reaching consequences regarding:

  • Changes to the European landscape: the passporting could lead to a reduction in the number of CSDs operating in the EU. Moreover, as a joint result of T2S and CSDR, the market could either undergo further fragmentation, or more concentration
  • Simplification of issuance abroad and facilitated cross-border settlement (key feature of T2S): issuers being able to issue securities in any EU CSD
  • Mandatory buy-ins and higher failed settlement penalties, which may impact market liquidity
  • Internalised settlement: settlement internalisers – any institution which executes transfer orders on behalf of clients or on its own account other than through a securities settlement system – will have to report (starting July 2019) to the national competent authority of their place of establishment, on a quarterly basis, the aggregated volume and value of all securities transactions which they settle outside securities settlement systems
  • Provision of banking services: the additional prudential rules for CSDs may result in a clearer separation between infrastructure functions and banking services
  • Harmonisation and shortening of settlement cycles: this could lead to further use of standardised settlement messaging services
  • Mandatory LEI (Legal Entity Identifier) use: the mandatory use of LEI should facilitate record keeping, as well as notary and settlement activities

BNP Paribas Securities Services’ view

We believe that this regulation is an important step forward for safer and more integrated post-trade infrastructures and for efficiency of security settlement. It is a crucial element of T2S’ success.

While we support the newly defined settlement discipline framework as it aims to reduce settlement fails without jeopardising market liquidity, we believe settlement discipline rules require strong adaptation from all market participants. We actively participate in ensuring effective implementation of this new framework and work on how to assist clients with this matter.

Key dates

August 2014 – Publication of CSDR in the Official Journal

17 September 2014 – CSDR entered into force

March 2017 – Publication of level 2 measures (excluding settlement discipline) in the Official Journal

September 2017 – Deadline for CSDs to apply for re-authorisation

May 2018 – Publication of European Commission delegated acts on settlement discipline

March 2019 – Entry into force of level 2 legislation on the calculation of cash penalties and internalised settlement

September 2019 – Start of the revision process of level 1 legislation

1 February 2022 – Expected entry into force of settlement discipline rules