Regulation (EU) No 909/2014 on improving securities settlement in the European Union and on central securities depositories (CSDR) certainly qualifies as one of the most important pieces of legislation in the area of post-trading and settlement.
With the main objective of CSDR being to increase the safety and efficiency of securities settlement and settlement infrastructures (namely CSDs and ICSDs), CSDR provides, amongst others, for:
- Shorter settlement periods,
- Settlement discipline measures,
- Mandatory dematerialisation for most securities,
- Strict prudential and conduct of business rules for CSDs,
- Strict access rights to CSD services, and
- Increased prudential and supervisory requirements for CSDs and other institutions providing banking services ancillary to securities settlement.
CSDs and ICSDs have hence over the course of the last months and years been working relentlessly to conform their systems and operations with the new requirements, while ensuring a smooth customer and participants’ experience. Nonetheless, market participants will also have to adapt their operations.
As such, the main immediate action points for CSD and ICSD participants may be summarised as follows:
- Review and adapt the collateral portfolios maintained with the CSD/ICSD,
- Change the download-cycle for the daily reports and set up appropriate processes for the daily reconciliation as well as put in place to communicate with the CSD/ICSD to solve reconciliation breaks as and when they occur,
- Put in place appropriate process to monitor the suspension of settlement for given ISIN(s),
- Prepare their liquidity planning to unforeseen delays in corporate actions processing,
- Review their preferred accounts structures
Further information on the various actions points for participants can be found in the attached presentation by Clearstream providing for a more detailed overview of the various impacts CSDR has on market participants.