ESMA Guidelines and Recommendations

ESMA updates the CSDR Q&As

ESMA Guidelines and Recommendations

Date: 08 October 2018

On 27 September 2018, the European Securities and Markets Authority (ESMA) updated its Questions and Answers (Q&As) regarding the implementation of the Central Securities Depository Regulation (CSDR).

The updated Q&A provided answers to questions regarding practical issues on the implementation of the new CSDR regime. The latest batch of CSDR Q&As covers the following topics:

  • Book-entry form requirements: the Q&A specifies the scope and timing of application of the requirement in Article 3(2) of CSDR to dematerialise certain transferable securities when they are transferred as collateral;
  • Organisational requirements: the Q&A concerns the scope of the services and activities of a CSD covered by the requirements set out in Article 30 of CSDR on Outsourcing;
  • Settlement Discipline: ESMA publishes the first set of Q&As relating to settlement discipline issues following the publication of Commission Delegated Regulation (EU) 2018/1229 on settlement discipline. The updated Q&A covers four issues in this area:
    • the frequency of the update of the exchange rate used to determine the tolerance level for settlement instructions in currencies other than EUR;
    • the scope of the joint management of the penalty mechanism for CSDs which use a common settlement infrastructure;  
    • clarification that the use of a common framework or rulebook is not sufficient to comply with the requirement for joint management of the penalty mechanism by CSDs using a common settlement infrastructure;
    • the possibility for CSDs to perform bilateral netting of cash penalties, as long as it is followed by the aggregation of the amounts resulting in one credit and one debit amount per CSD participant.

Q&As are an important tool to promote common supervisory approaches and practices in the application of CSDR. This document is aimed at national competent authorities under the Regulation to ensure that, in their supervisory activities, their actions are converging along the lines of the responses adopted by ESMA. It should also help investors and other market participants by providing clarity on CSDR requirements.

The aim of CSDR is to harmonise certain aspects of the settlement cycle and settlement discipline and to provide a set of common requirements for CSDs operating securities settlement systems across the EU. ESMA will continue to develop Q&As on the CSDR in the coming months and will review and update them where required.