Central Securities Depository Regulation (CSDR)

The Central Securities Depositories Regulation (CSDR) is the regulation relating to securities settlement and central securities depositaries (CSDs) that entered into force on 17 September 2014.
It applies to CSDs that are based in the European Union and their participants. The principal objectives of the CSDR are to:

• Increase the safety and efficiency of securities settlement and the settlement infrastructures in the European Union (EU);
• Harmonise the different CSD rules in the European Union; and
• Establish an enhanced level playing field among CSDs.

The CSDR is a European-wide regulation, which is directly applicable to all Member States. Statutory Instrument No. 481/2016 (European Union (Central Securities Depositories) Regulations 2016 transposes the regulation into Irish law. The Central Bank of Ireland has been designated the Competent Authority (CA) responsible for carrying out the duties under CSDR for the authorisation and supervision of CSDs established in the State.

Currently the Irish market utilises settlement systems located in a number of different European countries.  Trades in Irish government bonds and Irish corporate securities and some exchange-traded funds (ETFs) are generally settled in Euroclear Bank, located in Belgium. The remaining Irish ETFs are settled in other European CSDs.

Settlement Discipline Regime

One of the key elements of the CSDR is the introduction of an obligation on central securities depositories (CSDs) to impose cash penalties; on participants in their securities settlement systems that cause settlement fails.

The new cash penalties; regime, which is intended to serve as an effective deterrent for participants that cause settlement fails and to incentivise those in the settlement chain to settle trades in a timely manner, entered into force on 1 February 2022.

One of the measures of the new settlement discipline regime established under the CSDR is the introduction of new mandatory buy-in rules. However the European Commission announced in November 2021 that the application of these new rules have been delayed and will not apply from 1 February 2022.

Dematerialisation

There is a requirement in the CSDR that all newly issued securities of quoted companies admitted to trading in the EU hold all shares through a CSD from 1 January 2023 and all existing transferrable securities of quoted companies admitted to trading in the EU must be represented in book entry from 1 January 2025. Therefore, by 2023, all newly issued securities will have to be in a dematerialised format, whilst by the start of 2025, all traded securities will need to be held electronically.

Immobilisation and dematerialisation should not imply any loss of rights for the holders of securities and should be achieved in a way that ensures that holders of securities can verify their rights.

In order to facilitate the implementation of this requirement, holders of securities in physical certificate form - whether shares, debt securities or units in collective investment schemes should contact their broker/issuer in the first instance.

Settlement Internalisers - Article 9(1) Reporting Requirements

Pursuant to Article 9(1) of the CSDR settlement internalisers shall report to their competent authority on a quarterly basis the aggregated volume and value of all securities transactions that they settle outside securities settlement systems. Further information can be obtained on ESMA’s website; this includes guidelines, technical guidance and related XML files as well as XSD for ISO20022. 

The Article 9(1) reporting regime is in effect in Ireland since July 2019.  For newly establishing firms, or existing firms with amending business models, that anticipate coming within the scope of this reporting regime to the Central Bank for the first time please complete the below questionnaire and return it to [email protected]  (The ‘Operational and Technical Arrangements’ for submitting settlement internaliser reports are also set out below.)

Non-Domestic CSD Notifications for Passporting of Notary, Safekeeping Services and Banking-Type Ancillary Services

The Home CA of CSDs wishing to provide services in Ireland are required to provide certain information to the Host CA under the CSDR. The Payments and Securities Settlements (PSS) Division within the Financial Operations Directorate of the Central Bank of Ireland is responsible for receiving the information from the Home CA. All correspondence should be sent to the following email address: [email protected].

Notary and Safekeeping Services

The Central Bank of Ireland must receive the information described in Article 23(3) of the CSDR from any non-domestic CSD that intends to offer notary and safekeeping services on a freedom of services basis or a freedom of establishment (branch) basis in accordance with Article 23 of the CSDR. The information must be sent by the Home CA of the service providing/branching CSD.

Banking-Type Ancillary Services

In accordance with Article 55 of the CSDR any CSD intending to seek authorisation to provide banking-type ancillary services that are deemed to be of substantial importance for the functioning of the Irish securities markets (as per the European Securities Markets Association (ESMA) criteria) must provide all information to the Central Bank of Ireland as Host CA. The information must be sent by the Home CA of the service providing/branching CSD.