CSDR

Central Securities Depositories Regulation (‘CSDR’)

Central Securities Depositories (‘CSDs’) are institutions which hold financial instruments (such as equities, bonds, mutual funds, derivatives et al.) and facilitate the electronic transfer of ownership of such instruments through updating of electronic records, known as ‘book- entry records.

The securities settlement systems operated by the CSDs have a key role in the settlement process as well as in the collateralisation process and consequently the functioning of securities markets. Due to their key position in the settlement process, the securities settlement systems operated by CSDs are of a systemic importance for the functioning of securities markets.

CSDs, together with central counterparties (‘CCPs’) contribute to a large degree in maintaining post-trade infrastructures that safeguard financial markets and give market participants confidence that securities transactions are executed properly and in a timely manner, including during periods of extreme stress.

The CSDR was adopted in 2014, in order to ensure the integrity and harmonisation of operation of the securities settlement systems, by laying down uniform technical standards and other obligations of CSDs.

In addition to providing for rules for the organisation and conduct of CSDs, the CSDR lays down obligations for ‘Settlement Internalisers’, i.e. any institution which executes transfer orders on behalf of clients or on its own account, other than through a securities settlement system. Such institutions, including Financial Institutions, are obliged to report on the aggregated volume and value of the securities transactions that they settle outside securities settlement systems, to the competent authorities of their place of establishment on a quarterly basis.

The financial instruments captured under CSDR’s reporting obligation are:

• financial instruments which are initially recorded or centrally maintained in CSDs authorised in the EU, i.e. financial instruments in relation to which an EU CSD acts in an issuer CSD capacity;
• financial instruments which are recorded in an EU CSD that acts in an investor CSD capacity for the respective financial instruments, even though they may be initially recorded or centrally maintained outside of CSDs authorised in the EU;

Moreover, the following types of transactions and operations should be considered in the scope of reporting:

1. purchase or sale of securities (including primary market purchases or sales of securities);
2. collateral management operations;
3. securities lending or securities borrowing;
4. repurchase transactions;
5. transfers of securities between accounts of different investment funds (funds with or without legal personality should be treated as clients);
6. execution of transfer orders by a settlement internaliser on its own account, to the extent that they result from securities transactions with clients of the settlement internaliser;
7. transfer of securities between two securities accounts of the same client;
8. title transfer financial collateral arrangements as defined in point (b) of Article 2(1) of Directive 2002/47/EC (‘FCD’);
9. security financial collateral arrangements as defined in point (c) of Article 2(1) of FCD, where there is a transfer of securities between accounts;
10. corporate actions on flow represented by transformations.

Our team is composed of highly trained people, who have extensive experience helping and advising a variety of firms on how to deal with complex and demanding European legislation such as CSDR.

Our services include:

• Regulatory analysis of impact on your business;
• Classify the financial instruments you trade;
• Determine obligations that apply to you;
• Example of reporting: start analysis of entire portfolio to determine which transactions need to be reported and by when;
• Develop an action plan for compliance;
• Adapt current operating model;
• Set feasible deadlines, and;
• Through our affiliated regulatory reporting technology provider, MAP FinTech, we can assist you automate reporting of CSDR.