GC: SRD II could pave the way for CSD tech innovation in data and STP

The EU’s Shareholder Rights Directive II (SRD II) could be an excellent opportunity for intermediary businesses – chiefly issuer central securities depositories (CSDs) – to augment their STP (straight-through-processing) capabilities, however, significant concerns have yet to be addressed about the extent of the regulation’s harmonization on a cross-border basis, writes Global Custodian reporting on comments made during AFME’s European Post-trade Conference.

SRD II demands intermediaries in the custody chain identify shareholders in EU listed companies and relay that information back to the issuers. In addition, the regulation stipulates that intermediaries will be expected to help support shareholder rights by transmitting information from issuers to investors and ensuring that arrangements – such as proxy voting forms – are available to them without undue delay. Some see this as an opportunity as it could incentivize technological innovation across intermediary providers.

“SRD II requires issuers to share information with the first intermediary, which is defined in the directive as the issuer CSDs. This is a chance for the issuer CSDs to become the primary sources of information in the market in what could facilitate improvements in data scrubbing and pave the way for true STP,” said Michael Collier, director, EMEA product development at Deutsche Bank, speaking at the conference in London. As SRD II is a directive and not a regulation, there is however, scope for arbitrage across different member states.

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