On 20 December 2022, EU member states settled their negotiating positions on a proposed update of the central securities depositories regulation (CSDR). The planned review will make EU securities settlement more efficient by simplifying requirements and clarifying authorisation processes among other things.
The proposed new rules, if adopted, will clarify that it is the home member state i.e. where the central securities depository (CSD) is authorised, that will ultimately decide on the CSD’s application to provide cross-border services. In the case where the CSD’s activities in at least two other member states are considered of substantial importance for the functioning of the securities markets and the protection of investors, a college of supervisors will be mandatorily set up. This will facilitate the exchange of information between supervisors and ease the cooperation between the member state authorities. The timeframe of the passporting process will also be clarified and shortened, in order to facilitate the provision of a broader scope of services across the member states.
In addition, the proposal further streamlines rules on so-called ‘mandatory buy-in’: where a transaction has failed to settle at the end of a prescribed period, the buyer of the securities could be forced to repurchase them elsewhere. The failing party would then be required to meet any price differential between the original and new transaction and all costs of the mandatory buy-in. Mandatory buy-in would be a new measure of last resort, to be activated only in the case where the level of settlement fails would be substantial in the EU.
Finally, the proposal also includes provisions on enabling CSDs’ access to banking-type ancillary services from other duly authorised CSDs, to facilitate settlement in non-domestic currencies.
This agreement will allow the European Council to start negotiations with the European Parliament to agree on a common test. The European Parliament is still in the process of adopting its position.