The Council of the EU and the European Parliament have reached a provisional agreement on an update to the Central Securities Depositories Regulation (CSDR). A press release announcing the agreement states that the update aims to “improve the efficiency of securities settlement in the EU by reducing compliance costs and regulatory burdens for CSDs”. In addition, it will “make it easier for CSDs to offer services across borders, while also improving cooperation among supervisors”.

Some areas that will be addressed in the update include:

A simpler passporting regime – Rules will be clarified and simplified to reduce the barriers to cross-border settlement and ease administrative and financial burden.

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Better supervision – The press release states that “in cases where a CSD’s activities in at least two other member states are considered to be of substantial importance to the functioning of the securities markets and investor protection, a collegewill be set up to facilitate cooperation and information exchange between member state authorities.”

Improved settlement efficiencyMandatory buy-ins will now only be used as “a measure of last resort, where the rate of settlement fails in the EU is not improving and is presenting a threat to financial stability”.

Banking-type ancillary services – Adjustments will be made to the conditions under which CSDs will be allowed to access banking-type services, making it possible for them to offer services across borders and a broader range of currencies.  

AFME weighs in

In response to the announcement, Peter Tomlinson, director of post trade at the Association for Financial Markets in Europe (AFME) mentions a mandate in the update for the European Securities and Markets Authority (ESMA) to assess the possibility of shortening the settlement cycle in the EU. AFME has established a task force early this year to “examine all aspects in this debate, including direct economic costs and savings to the industry, as well as factors relating to global alignment and market attractiveness”.