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The Settlement Discipline Regime (SDR) phase of CSDR successfully went live on 1 February 2022, without the mandatory buy-in requirement. The initial industry reaction has been that settlement efficiency has improved marginally to date and maybe slower than hoped for, but partial settlement is now being more widely used.

Explore our insights and what this might mean for your firm.


The Central Securities Depositories Regulation (CSDR) introduced new measures for the authorisation and supervision of EU Central Security Depositories (CSDs) and sets out to create a common set of prudential, organisational, and conduct of business standards at a European level. A large part of CSDR is designed to support the achievement of the objectives of Target2Securities (T2S) system by the introduction of a securities settlement discipline regime. This harmonises operational aspects of securities settlement, including the provision of shorter settlement periods; and cash penalties, to prevent and address settlement fails.



The CSDR applies to all European CSDs and to all market operators in the context of securities settlement. Trading parties, central counterparties (CCPs), clearing and settlement agents (which are members of the CCPs and CSDs) and trading venues will also be impacted and will have to directly comply with some of the measures, in particular the introduction of mandatory buy-in regime and cash penalties for settlement failures. It should be noted that members of the European System of Central Banks and other national or public bodies that perform similar services, which would otherwise qualify as CSDs, are exempt from certain requirements under the CSDR, including those relating to authorisation.*

Key Objectives

  • To harmonise the different rules applicable to the CSDs in Europe
  • To establish a level playing field among these CSDs
  • To increase the safety of securities settlement and the settlement infrastructures in the EU
  • To increase the efficiency of security settlement through introducing a true market for the operations of national CSDs
  • To increase safety of CSDs through applying high prudential requirements in line with international standards
  • To create an integrated market for securities settlement with no distinction between national and cross-border securities transactions

Key Impacts

Phase 1 and 2 – Omnibus/Segregated Accounts and Internalised Settlement Reporting

Phase 1, where providers are required to offer the option of individual segregated accounts, and Phase 2, the requirement to report internally settled trades have both been implemented. The list of authorised CSDs for CSDR can be found here.

Phase 3 – Settlement Discipline Regime (SDR)

Phase 3 went live on 1 February 2022 and introduced a number of measures to prevent settlement fails by ensuring that all transaction details are provided to facilitate settlement, as well as further incentivising timely settlement by cash penalty fines and buy-ins.

The introduction of the mandatory buy-in requirements was however postponed. CSDs are now required to provide functionality to participants to ensure harmonisation and automation of settlement processes across all European Economic Area markets to improve settlement efficiency.

Mandatory buy-ins – Removed for Now

In response to strong industry opposition and lobbying, the European Commission removed mandatory buy-ins from CSDR in March 2022, with the caveat that they could be reintroduced if fail rates didn’t improve. In October 2022, the European Parliament (EP) published a report proposing to dispense with mandatory buy-ins altogether. This follows similar recommendations from the European Commission.

To provide further time to determine this, the European Union has confirmed that mandatory buy-ins would not come into force until at least November 2025.

Future Requirements

Article 3 Book-entry form: Any issuer established in the EU that issues or has issued transferable securities which are admitted to trading or traded on trading venues, is required to arrange for such securities to be represented in book-entry form (electronically). Any new security must be issued in book-entry form by January 2023, and all securities must be in book-entry form by January 2025.


The European Commission published the review proposal of the Central Securities Depositories Regulation (CSDR) on 16 March 2022 to provide a new framework for settlement discipline and whilst the proposals mainly focus on the CSDs themselves, it also provides some further clarity in specific areas. Of interest to market users is a review of the scope and the mechanisms of the settlement discipline introduced by article 7 in order to address settlement fails more appropriately and proportionately.

The EC draft is now with the European Council and Parliament with each institution to decide on the content and the amendments to be made.

Linda Gibson, Head of Regulatory Change (December 2022)

CSDR has been a key focus for financial services firms and introduction of the SDR in February 2022 proved to be a significant operational and infrastructure change, impacting all parties in the settlement chain in transactions across European securities.

We have seen that settlement efficiency has increased marginally since CSDR going live with the real benefit being that this has been more consistent post CSDR. We are also seeing that partial settlement is now more common in the marketplace which whilst not greatly impacting the settlement efficiency rate, it has reduced the value of the fails which is evidenced through the reduced value of the penalties. This is in line with pre- CSDR industry expectations.

A further benefit is that it has reduced liquidity issues across the market and therefore alleviated the need for mandatory buy-ins.

The current thinking from the EU regulators is to only introduce buy-ins if the penalties regime doesn’t work and that will not come into force until November 2025 or potentially, drop mandatory buy-ins completely. This is a good result for the industry.

Meanwhile, the EU CSDR Refit initiative looks to provide a new framework, including the CSD passporting procedure, cooperation between countries, cross-border settlements and importantly, revise the scope of the SDR and the mandatory buy-ins. Pershing continues to contribute to industry associations on these proposals.

Note ESMA in a letter to the Commissioner for Financial Services dated 20 May 2021 proposes that CSDR should be amended in order to ensure T2S (which currently entirely out of scope of CSDR) is included.

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