The Central Securities Depositories Regulation (CSDR)

The Central  Securities Depositories Regulation (CSDR)

February 25, 2021

The third phase of the CSDR, the Settlement Discipline Regime (SDR) has been delayed to February 2022. The industry is in consultation with EU Commission/ESMA to discuss key roadblocks to implementation around buy-ins and other items. The announcement that the UK will not implement SDR signals a divergence in rule making between the EU and the UK.

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

Recent Developments

In June 2020, the UK Government confirmed that the UK will not implement the SDR, and instead UK firms should continue to apply the existing industry-led framework. Any future legislative changes will be developed in cooperation through consultation with the industry to ensure that any regime is appropriate for the UK market.

Following the UK’s announcement, in July 2020 ESMA announced its intention to delay SDR by another year to 1 February 2022 and this has now been confirmed.

Pershing continues to actively engage with key industry players and industry associations on these developments. Specifically, we are actively engaged with AFME and are also participating on the proposal for regulatory change so that the penalties mechanism is the key lever for driving settlement efficiency and the buy-in process is amended to be the optional right of the purchaser rather than a mandatory obligation for non CCP-cleared transactions.


The Central Securities Depositories Regulation (CSDR) introduces 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; mandatory buy-ins; 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)

The SDR introduce 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. This is the most contested aspect of CSDR with industry concerns that mandatory buy-ins could affect liquidity and costs. In addition, CSDs are required to provide functionality to participants to ensure harmonisation and automation of settlement processes across all European Economic Area markets to improve settlement efficiency.

Other 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.

Linda Gibson, Director of Regulatory Change (February 2021)

In July, the UK Government announced that it will not implement the Settlement Discipline Regime (SDR) component of CSDR, scheduled to come into effect in February 2022.

In its place, the Chancellor advised UK firms to continue to apply the existing framework and stated that any future legislative changes will be developed in cooperation through consultation with industry.

It is a welcome development that the government is responding to legitimate industry concerns - but it is important to note that the specifics of the announcement, and how they will work practically, are still to be determined. For UK firms that execute trades for settlement in the European market, attention to the requirements of the SDR is still required particularly given the challenges in implementing the buy-in requirements. Notwithstanding this, firms' SDR implementation projects should benefit from the delay to 1 February 2022 which allows for clarification by the ESMA/EU Commission of requirements in key areas such as mandatory buy-ins. We will continue to monitor developments in this area.