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The following FAQs will help clarify some of the key issues surrounding the Central Securities Depository Regulation (CSDR).


CSDR introduces new measures for the authorisation and supervision of the European Union (EU) Central Security Depositaries (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 facilitates the objectives of Target2-Securities (T2S) regulation by the introduction of a securities discipline regime. This harmonises operational aspects of securities settlement, including the provision of shorter settlement periods; mandatory buy-ins; and cash penalties, to prevent and address settlement fails.

  • Introduce rules and safeguards in the event of CSD insolvency;
  • Standardises CSD regulations across all of Europe;
  • Provides greater transparency and more open access in the market; and
  • Improve settlement timeframes and reduce the number of fails.
  • The offering of omnibus and segregated accounts;
  • The requirement to report internalised settlement; and
  • The introduction of the settlement discipline regime.

Segregated Accounts

Article 38(5) of CSDR requires firms to offer their clients the choice between omnibus client segregation in an Omnibus Client Segregated Account (OSA) and individual client segregation in an Individual Client Segregated Account (ISA). Account segregation is offered at the custody level as opposed to at the clearance level.
This requirement requires CSDs to maintain records and accounts that enable a participant to hold, in their books, securities separately from other participants and from any proprietary assets the CSD itself may hold.
CSD participants need to be ready to offer their clients a choice of segregated or omnibus accounts as and when each CSD is re-authorised under CSDR.

An OSA is used to hold the securities of a number of clients on a collective basis.

An ISA is used to hold the securities of a single client and therefore the client’s securities are held separately from the securities of other clients and the firm’s own proprietary securities.

The general industry perception is that individually segregated accounts do not offer any further asset protection over omnibus accounts. This is largely due to the existing client asset protection regime that already provides a level of protection to securities held in an omnibus account. In the event of CSDs insolvency, it is not expected that the investor’s entitlement to their securities at the CSD would be affected regardless of whether the securities are held in ISAs or OSAs.

In general, CSD participant firms should be reviewing the impact of all the CSDR requirements on them and communicating on all CSDR themes that are relevant to their clients.

With regards to segregated accounts:

  • Firms should be discussing the risks associated with choosing a segregated or omnibus account;
  • Firms should work out now what they plan to offer to their clients and how they will make this offering available, so that the options will be ready for communication to clients as soon as the CSDs receive their re-authorisations;
  • Firms should be in a position to offer their investors the choice between OSA and ISA once each EU CSD becomes re-authorised under CSDR, and
  • Under Article 38(6) of CSDR firms are required to publicly disclose the levels of protection associated with the different levels of segregation that they provide in respect of securities that they hold directly for clients with EU CSDs and to inform their clients of the costs and risks associated with the different levels of protection. Firms should also be preparing these disclosures.

The regulation states that all CSDs must apply for a universal CSD licence to operate and undergo a re-authorisation process to operate under the new CSDR regime. EU member state CSDs had six months to submit their authorisation files with their respective national competent authorities (NCAs) following the publication in the EU Official Journal (OJ) of the official set of Regulatory Technical Standards (RTS), published on 10 March 2017. Application files were submitted to the NCAs in September 2017.

Article 38 (6) states that CSDs and their participants should offer their services on reasonable commercial terms. There are no prescribed costs detailed in CSDR itself. In general, the costs are higher for maintaining an ISA over an OSA due to the increased operational complexity and the costs associated with setting up and maintaining an ISA. Each CSD and its participants are required to disclose the costs associated with the different levels of protection associated with an ISA and an OSA.

Internalised Settlement Reporting

Internalised settlement reporting requirements apply to transactions that are settled internally i.e. outside of a securities settlement systems.

Firms will be required to report the volume and value of all securities transactions that were settled internally on a quarterly basis to our local competent authorities.

The first internalised settlement report, that was due to the local competent authorities on 12 July 2019, contained details of transactions that were settled internally from 1 March 2019 to 30 June 2019 inclusive.

The European Securities and Markets Authority (ESMA) has drafted technical standards to establish the forms, templates and procedures for the reporting and transmission of this information to the local competent authorities.

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