ESMA reports to EC on CSDR implementation

The European Securities and Markets Authority (ESMA) published its first two reports on the implementation of the Central Securities Depositories Regulation (CSDR) covering central securities depositories’ (CSDs) cross-border services and handling of applications as well as internalized settlement.

Report on cross-border services and application handling

No major variations in the provision of cross-border services have been detected since the entry into force of CSDR, but most respondents do foresee a potential increase in the coming years. They have also pointed out challenges, in particular linked to the application process to provide notary and central maintenance services in relation to securities constituted under the laws of other Member States, as set out under Article 23 of CSDR. The Report includes suggestions to simplify the existing process.

Report on internalized settlement

While no major risks have been identified during the period covered by the report, NCAs have identified some risks related to this activity, the most common being operational risk and custody risk, which could be mitigated through adequate identification of the clients’ accounts involved, and the improvement of operational processes.

The challenges encountered when implementing the internalized settlement reporting regime seem normal in terms of any new reporting requirements. ESMA, to support the implementation process, has provided additional clarifications through supervisory convergence measures, including the ESMA Guidelines on internalized settlement reporting, as well as Q&As.

ESMA considers that custodians’ clients should be informed of the risks and costs associated with internalized settlement, and highlights the importance of continuing to monitor internalized settlement, in order to assess if this activity should be regulated in the future.


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