European Commission Launches Consultation on CSDs
Posted on Tue, Jan 18, 2011 @ 12:46 PM
The European Commission has launched a consultation on Central Securities Depositories (CSDs) and the harmonization of certain aspects of securities settlement in the European Union. The purpose of the consultation is to gather input from stakeholders in order to inform legislative proposals due in June 2011. The deadline for replies is March 1, 2011.
Key elements of the consultation include:
- Common regulatory framework for CSDs: CSDs in the European Union should operate under a common regulatory framework that ensures the robustness of their operation. Such a framework should include common definitions of CSD services, common rules on authorization on ongoing supervision of CSDs, high prudential standards for CSDs and rules on access and interoperability. The Consultation seeks stakeholders' comments on the proper design of such a common regulatory structure.
- Harmonization of key aspects of securities settlement: The consultation also asks what measures could be taken to address concerns relating to the functioning of securities settlement. It seeks stakeholders' input on how to improve settlement discipline, i.e. that a transaction actually settles on the intended settlement date. This issue is also considered in the Proposal for a Regulation on Short Selling and Credit Default Swaps adopted by the European Commission dated September 15, 2010 which contemplates (amongst other things) that penalties will be imposed in the event there is a settlement failure. Another important aspect of the consultation concerns the harmonization of settlement periods, i.e. the time between the conclusion of a transaction and settlement. Currently, European securities markets do not follow a common settlement period (e.g. for equities, regulated markets either settle two days or three days after trade (T+2 or T+3)).
Together with the proposal for a Regulation on "OTC Derivatives, Central Counterparties and Trade Repositories" (EMIR) published by the European Commission on September 15th, 2010 and the Markets in Financial Instruments Directive (MiFID, currently under review), this consultation will provide a framework in which systemically important securities infrastructures (trading venues, central counterparties, trade repositories and central securities depositories) are subject to common rules at a European level.
CSDs are systemically important infrastructures, performing services that allow registration, safekeeping, settlement of securities in exchange for cash and efficient processing of securities transactions in financial markets. They also provide a critical role in guaranteeing a safe and efficient transfer of securities that exist to a large extent only in book entry form.
Click here to learn more about the consultation and how to submit your contribution.
