On 26 June 2025, the European Securities and Markets Authority (ESMA) published a Final Report containing technical advice on the scope of settlement discipline under the Central Securities Depositories Regulation (CSDR).

Background

Article 7(9) of the CSDR, as amended by CSDR Refit (Regulation 2023/2845), empowers the European Commission (Commission) to adopt delegated acts to supplement the CSDR by specifying: (i) the underlying causes of settlement fails that are considered as not attributable to the participants in the transaction, and (ii) the circumstances in which operations are not considered as trading. ESMA received a request from the Commission to provide technical advice to assist in preparing such a delegated act. ESMA issued a consultation last summer to collect stakeholder views.

Final Report

The technical advice in the Final Report covers the underlying causes of settlement fails not considered as attributable to the participants in the transactions, the circumstances in which operations are not considered as trading and the practical implementation of those exemptions. To that end, it describes and analyses the feedback received by ESMA following the related public consultation. Finally, the technical advice carries out a cost-benefit analysis of the main policy options adopted.

Key points

Key points in the Final Report include:

  • As for settlement fails that are considered as not attributable to the participants, ESMA expands on the scenarios initially identified in the CSDR Q&As to include: ISIN suspensions due to reconciliation issues; technical failures at the central securities depository (CSD) level, such as system outages, cyberattacks, or network issues; full-day trading suspension of an ISIN on its most liquid market; cash settlement issues when the relevant payment system is closed;  instructions involving sanctioned securities or issuers; instructions blocked by official orders from authorities; CSD risk management procedures foreseen in an exceptional manner; and technical errors or data issues at the CSD not caused by participants.
  • As for operations which should not be considered as trading, ESMA has identified: (de)mobilisation of collateral for European System of Central Banks credit operations; market claims and corporate actions on stock; technical creation of securities; share registration; technical creation and redemption of fund units or shares on the primary market (including exchange traded fund shares), i.e. the crediting (in the case of creation) or the debiting/elimination (in the case of redemption) of the fund units or shares from the fund/transfer agent CSD account; technical realignment operations between CSDs including TARGET2-Securities technical realignment operations.
  • ESMA recommends handling exemptions for settlement fails not caused by participants through ex-post claims, unless a CSD’s cost-benefit analysis shows that ex-ante filters would be more efficient. In contrast, for exemptions related to non-trading operations, ESMA advises CSDs to apply ex-ante filters due to the high volume of cases involved. ESMA proposes different application dates for each exemption. The exemption for settlement fails not attributable to participants should follow the standard timeline. For operations not considered as trading, ESMA recommends a longer implementation period, at least 12 months after the Commission Delegated Act is published in the Official Journal of the EU, and ideally no later than the end of Q2 2027.
  • ESMA addresses the eventual alignment between the scope of cash penalties and the mandatory buy-in.

Next steps

The Commission will consider ESMA’s technical advice when preparing a new delegated act supplementing the CSDR further specifying the scope of operations and transactions subject to the settlement discipline regime.

The Commission’s powers to adopt delegated acts are subject to Article 67 of the CSDR that allows the European Parliament and the Council to object to a delegated act within a period of three months, extendible by a further three months at the initiative of the European Parliament or of the Council.