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Central Securities Depositories Regulation


Central Securities Depositories Regulation (CSDR) harmonizes the authorization and supervision of Central Securities Depositories (CSDs) within the EU, but will also introduce obligations for CSD-participants such as Northern Trust in areas including settlement discipline and account segregation, which will likely affect our clients.

Although CSDR came into force in 2014, many of its provisions are phased in their application, meaning several key requirements are yet to take effect.


  • The migration of EU markets to a trade date plus two day (T+2) settlement cycle has already been mandated by CSDR, with most markets doing so in October 2014 ahead of the regulatory deadline.
  • Market participants that fail to deliver their securities on the agreed settlement date will be subject to penalties and if the trade has not been settled within four business days from settlement date, a buy in process will be initiated.
  • Dematerialization of securities; issuers and investors will be required to keep an electronic record for virtually all securities, and to record them in CSDs if they are traded on stock exchanges or other regulated markets. This requirement is to be implemented by 2023 for new securities and 2025 for existing securities.
  • CSDs will have to comply with strict organizational, conduct and prudential requirements to ensure the protection of their users. They will also need to apply for authorization and subsequently will become supervised by their national competent authorities.
  • Authorized CSDs may be granted a 'passport' to provide their services in other Member States allowing users to choose between CSDs in Europe
  • CSDs in the EU will have access to any other CSD or market infrastructures such as trading venues or Central Counterparties (CCPs), regardless of country.
  • CSDs will be obliged to offer omnibus and individual segregated accounts. Direct CSD-participants (those that can perform all activities in the transfer system without using an intermediary) will also be obliged to offer the choice between omnibus and individual segregated accounts, and to publically disclose the legal implications and costs associated with each.

On March 10, the CSDR technical standards on CSD authorization were published in the Official Journal. CSDs have six months from March 30 to apply for the required authorizations. On receipt of the application the national competent authorities will have 30 days to confirm whether the application is complete, then a six-month timeframe will begin within which authorization may be granted or refused. The requirement for direct-CSD participants to offer the choice between omnibus and individually segregated accounts is linked to the date on which the CSD in which they are a participant is authorized, meaning the exact deadlines for the obligation remain unclear. Several CSDs have publicly expressed their aim to submit applications to the local regulators in September 2017 with the expectation authorization will be granted by mid-May 2018.

On July 10, ESMA published a consultation paper on the guidelines regarding internalized settlement reporting in CSDR. Responses submitted by September 14 will be reviewed.

Entry into force of the settlement discipline requirements is expected 24 months after the Commission adopts the technical standards, which are to be published later in the year.

The extent to which assets should be segregated remains an ongoing discussion point between regulatory bodies and financial entities. Last September, ESMA’s call for evidence on asset segregation and custody services under AIFMD and UCITS V came to an end. On July 21, ESMA published an opinion on asset segregation and custody services, setting out its views on: the approach to segregation under AIFMD and UCITS V, as well as how the depositary delegation rules should apply to CSDs.

Northern Trust has a CSDR implementation program to ensure we meet all our compliance obligations. Members of this program have met with regulatory and industry bodies to discuss various implications of the provisions contained within the legislation. In order to comply with the account segregation aspects of CSDR, we will offer individual segregated accounts in markets where we are a direct CSD participant. Further detail in relation to account segregation will be circulated in accordance with the regulatory requirements. As discussed above, the timeline for the requirement to offer these different accounts is based on the date of CSD authorization.

All market operators in the context of securities settlement and all CSDs

The RTS on CSD authorization have now been published in the Official Journal

Robert Angel

Robert Angel

Head of Regulatory Services, Product Solutions Group, EMEA
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Robert Angel

Robert Angel

Head of Regulatory Services, Product Solutions Group, EMEA
Robert joined Northern Trust in September 2013 as head of Regulatory Services, Product Solutions Group, EMEA. The Regulatory Services team acts as a consolidated point of contact on our portfolio of regulatory projects, with responsibility for regulatory client communication, and the services and products that Northern Trust can offer our clients in the regulatory space.
Prior to joining Northern Trust, Robert spent over 16 years at Merrill Lynch (now Bank of America Merrill Lynch) in Prime Brokerage and during this time ran the hedge fund client service, client consulting, product development and client on-boarding teams.



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