Text proposed by the Commission Amendments proposed by the ECB (1)

Amendment 1

Recital 6

‘6. The Financial Stability Board (FSB) called, on 20 October 2010, for more robust core market infrastructures and asked for the revision and enhancement of the existing standards. The Committee on Payments and Settlement Systems (CPSS) of the Bank of International Settlements (BIS) and the International Organisation of Securities Commissions (IOSCO) are finalising draft global standards. These are to replace the BIS recommendations from 2001, which were adapted through non-binding guidelines at European level in 2009 by the European System of Central Banks (ESCB) and the Committee of European Securities Regulators (CESR).’ ‘6. The Financial Stability Board (FSB) called, on 20 October 2010, for more robust core market infrastructures and asked for the revision and enhancement of the existing standards. In April 2012, the Committee on Payments and Settlement Systems (CPSS) of the Bank of International Settlements (BIS) and the International Organisation of Securities Commissions (IOSCO) published principles for financial market infrastructures. These principles replace theCPSS-IOSCO recommendations for securities settlement systems from November 2001, which were implemented at Union level throughthe recommendations for securities settlement systems and for central counterparties jointly adopted in May 2009 by the European System of Central Banks (ESCB) and the Committee of European Securities Regulators (CESR).’

Explanation The amendment takes account of the adoption of the CPSS-IOSCO principles and clarifies the reference to the ESCB-CESR.

Amendment 2

Recital 8

‘8. One of the basic tasks of the ESCB is to promote the smooth operation of payment systems. In this respect, the members of the ESCB execute oversight by ensuring efficient and sound clearing and payment systems. The members of the ESCB often act as settlement agents for the cash leg of the securities transactions. They are also important clients of CSDs, which often manage the collateralisation of monetary policy operations. The members of the ESCB should be closely involved by being consulted in the authorisation and supervision of CSDs, recognition of third country CSDs and the approval of CSD links. They should also be closely involved by being consulted in the setting of regulatory and implementing technical standards as well as of guidelines and recommendations. The provisions of this Regulation should be without prejudice to the responsibilities of the European Central Bank (ECB) and the National Central Banks (NCBs) to ensure efficient and sound clearing and payment systems within the Union and other countries.’ ‘8. One of the basic tasks of the ESCB is to promote the smooth operation of payment systems. In this respect, the members of the ESCB execute oversight by ensuring efficient and sound clearing and payment systems. The members of the ESCB often act as settlement agents for the cash leg of the securities transactions. They are also important clients of CSDs, which often manage the collateralisation of monetary policy operations. The members of the ESCB should be closely involved and be consulted in the authorisation and supervision of CSDs, recognition of third country CSDs and the approval of CSD links. To prevent the emergence of parallel sets of rules, they should also be closely involved and be consulted in the setting of regulatory and implementing technical standards as well as of guidelines and recommendations. The provisions of this Regulation are without prejudice to the responsibilities of the European Central Bank (ECB) and the National Central Banks (NCBs) to ensure efficient and sound clearing and payment systems within the Union and other countries. Access to information by the members of the ESCB is crucial for the adequate performance of their oversight of financial market infrastructures as well as to the function of a central bank of issue.’

Explanation The amendment aims to underline the importance of close and equal cooperation between ESMA and the ESCB when preparing draft technical standards. It also addresses access to information by the relevant stakeholders. It would support the proposed amendments to Article 20.

Amendment 3

Recital 25

‘25. Considering the global nature of financial markets and the systemic importance of the CSDs, it is necessary to ensure international convergence of the prudential requirements to which they are subject. The provisions of this Regulation should follow the existing recommendations developed by CPSS-IOSCO and ESCB-CESR. ESMA should consider the existing standards and their future developments when drawing up or proposing to revise the regulatory technical and implementing standards as well as the guidelines and recommendations required in this Regulation.’ ‘25. Considering the global nature of financial markets and the systemic importance of the CSDs, it is necessary to ensure international convergence of the prudential requirements to which they are subject. The provisions of this Regulation should follow the existing CPSS-IOSCO principles for financial market infrastructures and the ESCB-CESR recommendations for securities settlement systems and recommendations for central counterparties in the European Union. ESMA should consider the existing standards and their future developments when proposing the draft regulatory technical and implementing standards as well as the guidelines and recommendations referred to in this Regulation.’

Explanation The amendment aims at clarifying the text of this recital and takes into account the adoption of the CPSS-IOSCO principles.

Amendment 4

Recital 35

‘35. The safety of the link arrangements set up between CSDs should be subject to specific requirements to enable the access of their respective participants to other securities settlement systems. The requirement to provide banking type of ancillary services in separate legal entity should not prevent CSDs from receiving such services, in particular when they are participants in a securities settlement system operated by another CSD. It is particularly important that any potential risks resulting from the link arrangements such as credit, liquidity, organisational or any other relevant risks for CSDs are fully mitigated. For interoperability links, it is important that linked securities settlement systems have identical moments of entry of transfer orders into the system, irrevocability of transfer orders and finality of transfers of securities and cash. The same principles should apply to CSDs that use a common settlement information technology (IT) infrastructure.’ ‘35. The safety of the link arrangements set up between CSDs should be subject to specific requirements to enable the access of their respective participants to other securities settlement systems. The requirement to provide banking type of ancillary services in separate legal entity should not prevent CSDs from receiving such services, in particular when they are participants in a securities settlement system operated by another CSD. It is particularly important that any potential risks resulting from the link arrangements such as credit, liquidity, organisational or any other relevant risks for CSDs are fully mitigated. For interoperability links, Directive 98/26/EC requires systems, to the extent possible, to ensure that their rules are coordinated concerning the moments of entry of transfer orders into the system, irrevocability of transfer orders and finality of transfers of securities and cash. The same principles should apply to CSDs that use a common settlement information technology (IT) infrastructure.’

Explanation The amendment introduces a reference to Directive 98/26/EC as Article 3(4) thereof requires systems to coordinate, to the extent possible, the rules of all interoperable systems concerned. See also the proposal to add a new paragraph to Article 45 of the proposed regulation.

Amendment 5

Article 1(4) and Article 1(5) (new)

‘4. Articles 9 to 18 and 20 as well as the provisions of Title IV do not apply to the members of the European System of Central Banks (ESCB), other Member States’ national bodies performing similar functions or Member States’ public bodies charged with or intervening in the management of the public debt.’ ‘4. This Regulation shall not apply to the members of the European System of Central Banks (ESCB) or Member States’ public bodies charged with or intervening in the management of the public debt. 5. Notwithstanding paragraph 4, this Regulation, with the exception of Article 7(1) and Articles 9 to 18, 20, 25 and 44 as well as the provisions of Title IV, applies to the members of the ESCB when operating a securities settlement system and performing the core services listed in Section A of the Annex.’

Explanation The ECB supports a general exemption from financial services legislation for the members of the ESCB. At the same time, the ECB supports the application of the proposed regulation, with the exemption of the authorisation and supervision requirements provided for in Articles 9 to 18 and 20 as well as in Title IV, to members of the ESCB that operate securities settlement systems. The amendment aims at providing for this. In addition, the reference to other Member States’ national bodies performing similar functions is deleted since it is redundant given the reference to ESCB members.

Amendment 6

Article 2(1)

‘ “central securities depository” (“CSD”) means a legal person that operates a securities settlement system listed in point 3 of Section A of the Annex and performs at least one other core service listed in Section A of the Annex;’ ‘ “central securities depository” (“CSD”) means a legal person that performs at least one of the core services listed in Section A of the Annex;’

Explanation The amendment changes the definition of CSD to avoid regulatory arbitrage stemming from the creation by a CSD of two or three legal entities to perform different core activities without being subject to regulation applicable to CSDs. The ECB considers that each legal person offering any of the three core services indicated in Section A of the Annex should be subject to the Regulation.

Amendment 7

Article 3(1)

‘1. Any company that issues transferable securities which are admitted to trading on regulated markets shall arrange for such securities to be represented in book-entry form as immobilisation through the issuance of a global note, which represents the whole issue, or subsequent to a direct issuance of the securities into a dematerialised form.’ ‘1. Any legal entity that issues transferable securities which are admitted to trading on regulated markets shall arrange for such securities to be represented in book-entry form as immobilisation through the issuance of a global note, which represents the whole issue, or subsequent to a direct issuance of the securities into a dematerialised form.’

Explanation Transferable securities can be issued by companies and by other legal entities, such as Member States, Member States’ regional or local authorities, or public international bodies. It is proposed to broaden the scope of Article 3(1) of the proposed regulation to include issuers other than companies, by replacing the term ‘company’ with ‘legal entity’. If this proposal is accepted, Article 4(1) of the proposed regulation should be amended accordingly.

Amendment 8

Article 6(4)

‘4. The European Securities and Markets Authority (ESMA) shall develop in consultation with the members of the European System of Central Banks (ESCB) draft regulatory technical standards to specify the details of the procedures enabling confirmation of relevant details of transactions and facilitating settlement referred to in paragraphs 1 and 2 and the details of the monitoring tools identifying likely settlement fails referred to in paragraph 3. […]’ ‘4. The European Securities and Markets Authority (ESMA), in close cooperation with the members of the European System of Central Banks (ESCB) shall develop draft regulatory technical standards to specify the details of the procedures enabling confirmation of relevant details of transactions and facilitating settlement referred to in paragraphs 1 and 2 and the details of the monitoring tools identifying likely settlement fails referred to in paragraph 3. […]’

Explanation The amendment aims at ensuring the adequate involvement of the ESCB in the development of draft regulatory standards by ESMA.

Amendment 9

Article 7(1)

‘1. For each securities settlement system it operates, a CSD shall establish a system that monitors settlement fails of transactions in financial instruments referred to in Article 5(1). It shall provide regular reports to the competent authority and to any person with a legitimate interest as to the number and details of settlement fails and any other relevant information. The competent authorities shall share with ESMA any relevant information on settlement fails.’ ‘1. For each securities settlement system it operates, a CSD shall establish a system that monitors settlement fails of transactions in financial instruments referred to in Article 5(1). It shall provide regular reports to the competent authority, to the authorities referred to in Article 11 and to any person with a legitimate interest as to the number and details of settlement fails and any other relevant information. The competent authorities shall share with ESMA any relevant information on settlement fails.’

Explanation The proposed amendment aims at ensuring the provision of timely and adequate information to both competent authorities and the members of the ESCB.

Amendment 10

Article 8

‘1. The relevant authority of the Member State whose law applies to the securities settlement system operated by a CSD shall be competent for ensuring that Articles 6 and 7 are applied and for monitoring the penalties imposed, in close cooperation with the authorities competent for the supervision of the regulated markets, MTFs, OTFs, and CCPs referred to in Article 7. In particular, the authorities shall monitor the application of penalties referred to in Article 7(2) and (4) and of the measures referred to in Article 7(6). 2. In order to ensure consistent, efficient and effective supervisory practices within the Union in relation to Articles 6 and 7 of this Regulation, ESMA may issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010.’ ‘1. The authorities referred to in Article 10 shall be responsible for ensuring that Articles 6 and 7 are applied and for monitoring any penalties imposed, in close cooperation with the authorities competent for the supervision of the regulated markets, MTFs, OTFs, and CCPs referred to in Article 7, and the authorities referred to in Article 11(1). In particular, these authorities shall monitor the application of penalties referred to in Article 7(2) and (4) and of the measures referred to in Article 7(6). 2. In order to ensure consistent, efficient and effective supervisory practices within the Union in relation to Articles 6 and 7 of this Regulation, ESMA may issue, in close cooperation with the members of the ESCB, guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010.’

Explanation The term ‘relevant authority’ is not defined in Article 1 of the proposed regulation. The amendment to paragraph 1 aims at clarifying that the authorities referred to in Article 10 and Article 11(1) should ensure compliance with Articles 6 and 7. The ECB further notes that the reference to applicable law is not aligned with the terminology used in Directive 98/26/EC (2). The proposed amendment to paragraph 2 aims at ensuring adequate involvement of the members of the ESCB. Articles 7(8), 15(7) to (8), 20(8) to (9), 24(8), 27(3) to (4), 30(6), 34(4), 35(6), 36(9), 42(7), 44(3), 47(6), 50(6), 51(5), 53(6), 57(5) and 58(4) should be amended accordingly.

Amendment 11

Article 11(1)

‘1. The following authorities shall be involved in the authorisation and supervision of CSDs whenever specifically referred to in this Regulation: (a) the authority responsible for the oversight of the securities settlement system operated by the CSD in the Member State whose law applies to that securities settlement system; (b) where applicable, the central bank in the Union in whose books the cash leg of a securities settlement system operated by the CSD is settled or, in case of settlement through a credit institution in accordance with Title IV, the central bank in the Union of issue of the relevant currency.’ ‘1. The following authorities shall be involved in the authorisation and supervision of CSDs whenever specifically referred to in this Regulation: (a) the authority responsible for the oversight of the securities settlement system operated by the CSD in the Member State whose law applies to that securities settlement system; (b) the central bank in the Union issuing the currency in which settlement takes place; (c) where relevant, the member of the ESCB in whose books the cash leg of a securities settlement system operated by the CSD is settled .’

Explanation The amendment aims at clarifying the role of central banks of issue, and that settlement in central bank money should be understood as settlement in the currency issued by that central bank.

Amendment 12

Article 12(1), second subparagraph

‘In order to ensure consistent, efficient and effective supervisory practices within the Union, including cooperation between authorities referred to in Articles 9 and 11 in the different assessments necessary for the application of this Regulation, ESMA may issue guidelines addressed to authorities referred to in Article 9 in accordance with Article 16 of Regulation (EU) No 1095/2010.’ ‘In order to ensure consistent, efficient and effective supervisory practices within the Union, including cooperation between authorities referred to in Articles 9 and 11 in the different assessments necessary for the application of this Regulation, ESMA, in close cooperation with the members of the ESCB, may issue guidelines addressed to authorities referred to in Article 9 in accordance with Article 16 of Regulation (EU) No 1095/2010.’

Explanation The proposed amendment aims at ensuring the adequate involvement of the members of the ESCB in the preparation of ESMA guidelines as authorities referred to in Article 11 of the proposed regulation.

Amendment 13

Article 13

‘The authorities referred to in Articles 9 and 11 shall immediately inform ESMA and each other of any emergency situation relating to a CSD, including of any developments in financial markets, which may have an adverse effect on market liquidity and on the stability of the financial system in any of the Member States where the CSD or one of its participants are established.’ ‘Without prejudice to the notification referred to in Article 6 of Directive 98/26/EC, the authorities referred to in Articles 9 and 11 shall immediately inform ESMA, the ESRB and each other of any emergency situation relating to a CSD, including of any developments in financial markets, which may have an adverse effect on market liquidity, the stability of a currency in which settlement takes place, integrity of monetary policy and the stability of the financial system in any of the Member States where the CSD or one of its participants are established.’

Explanation The amendment aims at involving the ESRB in view of the nature of the emergency situation referred to, which may affect the stability of the financial system. It also aims at clarifying that the stability of relevant currencies and the integrity of monetary policy are relevant factors for the safety of CSDs. The information procedure in this Article should be without prejudice to the notification required under Article 6(3) of Directive 98/26/EC.

Amendment 14

Article 15(5)

‘5. The competent authority shall, before granting authorisation to the applicant CSD, consult the competent authorities of the other Member State involved in the following cases: […]’ ‘5. The competent authority shall, before granting authorisation to the applicant CSD, consult the competent authorities and the authorities referred to in Article 11 of the other Member State involved in the following cases: […]’

Explanation The CPSS-IOSCO principles underline the importance of cooperation between central banks, supervisors and other relevant authorities. The proposed amendment aims at ensuring such cooperation with respect to the rules applicable to authorisation of CSDs. If this proposal is accepted, Article 17(2), Article 18(2), Article 22 and Article 23 of the proposed regulation should be amended accordingly.

Amendment 15

Article 17(1)(d)

‘An authorised CSD shall submit a request for authorisation to the competent authority of the Member State where it is established whenever it wishes to outsource a core service to a third party under Article 28 or extend its activities to one or more of the following: […] (d) setting up any CSD link.’ ‘An authorised CSD shall submit a request for authorisation to the competent authority of the Member State where it is established whenever it wishes to outsource a core service to a third party under Article 28 or extend its activities to one or more of the following: […]; (d) setting up any interoperability link.’

Explanation Considering its administrative burden, the procedure provided for in Article 17(1) should be limited to interoperable CSD links. It is also proposed to apply similar amendments to Articles 45(2) and 50(3) of the proposed regulation.

Amendment 16

Article 19(2)

‘2. Central banks shall immediately inform ESMA of any CSD that they operate.’ ‘2. Members of the ESCB shall inform ESMA of any securities settlement system that they operate.’

Explanation The amendment aims at clarifying the scope of Article 19(2). In line with recital 9 and Article 1(4) of the proposed regulation, it clarifies that members of the ESCB do not operate CSDs, but may operate a securities settlement system and perform another core service listed in Section A of the Annex.

Amendment 17

Article 20

‘1. The competent authority shall, at least on an annual basis, review the arrangements, strategies, processes and mechanisms implemented by a CSD with respect to compliance with this Regulation and evaluate the risks to which the CSD is, or might be, exposed. […] 4. When performing the review and evaluation referred to in paragraph 1, the competent authority shall consult at an early stage the relevant authorities referred to in Article 11 concerning the functioning of the securities settlement systems operated by the CSD. 5. The competent authority shall regularly, and at least once a year, inform the relevant authorities referred to in Article 11 of the results, including any remedial actions or penalties, of the review and evaluation referred to in paragraph 1. […]’ ‘1. The competent authority shall, at least on an annual basis, review the arrangements, strategies, processes and mechanisms implemented by a CSD with respect to compliance with this Regulation and evaluate the risks to which the CSD is, or might be, exposed or associated with. The competent authority shall be entitled to collect all the relevant information necessary for its evaluation. […] 4. When performing the review and evaluation referred to in paragraph 1, the competent authority shall closely cooperate with the relevant authorities referred to in Article 11 at an early stage concerning the functioning of the securities settlement systems operated by the CSD. 5. The competent authority shall discuss regularly and in advance with the relevant authorities referred to in Article 11 the results, including any remedial actions or penalties, of the review and evaluation referred to in paragraph 1. […]’

Explanation The amendment to paragraph 1 aims at ensuring that the competent authorities collect and receive all relevant information necessary for the assessment and macro-prudential analysis of risks to which a CSD is or may be exposed, including risks associated with its systemic role. The amendments to paragraphs 4 and 5 aim at formalising close cooperation between competent authorities, overseers and other relevant authorities.

Amendment 18

Article 21(2)

‘2. Any CSD wishing to provide its services within the territory of another Member State for the first time, or to change the range of services provided shall communicate the following information to the competent authority of the Member State where it is established: (a) the Member State in which it intends to operate; (b) a programme of operations stating in particular the services which it intends to provide; (c) in case of a branch, the organisational structure of the branch and the names of those responsible for the management of the branch.’ ‘2. Any CSD wishing to provide its services within the territory of another Member State for the first time, or to change the range of services provided shall communicate the following information to the competent authority of the Member State where it is established: (a) the Member State in which it intends to operate; (b) a programme of operations stating in particular the services which it intends to provide, including the currency or currencies it processes; (c) in case of a branch, the organisational structure of the branch and the names of those responsible for the management of the branch.’

Explanation The CSD should provide information on the currency or currencies in which it provides settlement. This information is necessary in order to determine the central banks of issue that should be involved in the authorisation and assessment process of that CSD.

Amendment 19

Article 21(3)

‘3. Within three months from the receipt of the information referred to in paragraph 2, the competent authority shall communicate that information to the competent authority of the host Member State unless, by taking into account the provision of services envisaged, it has reasons to doubt the adequacy of the administrative structure or the financial situation of the CSD wishing to provide its services in the host Member State.’ ‘3. Within three months from the receipt of the information referred to in paragraph 2, the competent authority shall communicate that information to the authorities referred to in Article 11 and the competent authority of the host Member State unless, by taking into account the provision of services envisaged, it has reasons to doubt the adequacy of the administrative structure or the financial situation of the CSD wishing to provide its services in the host Member State.’

Explanation The amendment aims at ensuring that the authorities referred to in Article 11 of the proposed regulation are also provided with the information referred to in Article 21(2) of the proposed regulation immediately and on an equal basis.

Amendment 20

Article 20a — Professional secrecy (new)

[No text] ‘1. The obligation of professional secrecy shall apply to all persons who work or who have worked for the authorities referred to in Articles 10 and 11 and ESMA, or auditors and experts instructed by the competent authorities, ESMA or the ESRB. Confidential information they may receive in the course of their duties shall not be divulged to any other person or authority whatsoever, except in summary or aggregate form such that an individual CSD or any other person cannot be identified, without prejudice to cases covered by criminal law or taxation or the other provisions of this Regulation. 2. Where a CSD has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties may be divulged in civil or commercial proceedings where necessary for carrying out the proceeding. 3. Without prejudice to cases covered by criminal and tax law, the authorities referred to in Articles 10 and 11, ESMA, bodies or natural or legal persons other than competent authorities which receive confidential information pursuant to this Regulation may use it only in the performance of their duties and for the exercise of their functions including the disclosure of information to a superior body, in the case of the competent authorities, within the scope of this Regulation or, in the case of other authorities, bodies or natural or legal persons, for the purpose for which such information was provided to them or in the context of administrative or judicial proceedings specifically related to the exercise of those functions, or both. Where ESMA, the competent authority or another authority, body or person communicating information consents thereto, the authority receiving the information may use it for other non-commercial purposes. 4. Any confidential information received, exchanged or transmitted pursuant to this Regulation shall be subject to the conditions of professional secrecy laid down in paragraphs 1, 2 and 3. However, those conditions shall not prevent ESMA, or the authorities referred to in Articles 10 and 11, from exchanging or transmitting confidential information in accordance with their statutory tasks and with other legislation applicable to investment firms, credit institutions, pension funds, undertakings for collective investment in transferable securities (UCITS), alternative investment fund managers (AIFMs), insurance and reinsurance intermediaries, insurance undertakings, regulated markets or market operators or otherwise with the consent of the competent authority or other authority or body or natural or legal person that communicated the information. 5. Paragraphs 1, 2 and 3 shall not prevent the authorities referred to in Articles 10 and 11 from exchanging or transmitting confidential information, in accordance with national law, that has not been received from a competent authority of another Member State.’

Explanation With this amendment, the ECB proposes introducing a professional secrecy regime similar to the corresponding provisions in other European financial services legislation, such as EMIR. To this end, it is proposed to insert a new Article 20a.

Amendment 21

Article 20b — Exchange of information (new)

[No text] ‘1. ESMA, the authorities referred to in Articles 10 and 11 and other relevant authorities shall without undue delay provide one another with the information required for the purposes of carrying out their duties. 2. The authorities referred to in Articles 10 and 11, other relevant authorities, ESMA and other bodies or natural and legal persons receiving confidential information in the exercise of their duties under this Regulation shall only use it in the course of their duties. 3. Competent authorities shall communicate information to the ESRB and to the relevant members of the ESCB where such information is relevant for the exercise of their duties.’

Explanation With this amendment, the ECB proposes introducing a regime on the exchange of information similar to the corresponding provisions in other European financial services legislation, such as EMIR. To this end, it is proposed to insert a new Article 20b.

Amendment 22

Article 22(7)

‘7. ESMA shall develop draft implementing technical standards to establish standard forms, templates and procedures for the cooperation arrangements referred to in paragraphs 1, 3 and 5. ESMA shall submit those draft implementing technical standards to the Commission by six months from the date of entry into force of this Regulation. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with the procedure laid down in Article 15 of Regulation (EU) No 1095/2010.’ ‘7. ESMA, in close cooperation with the members of the ESCB, shall develop draft implementing technical standards to establish standard forms, templates and procedures for the cooperation arrangements referred to in paragraphs 1, 3 and 5. ESMA shall submit those draft implementing technical standards to the Commission by six months from the date of entry into force of this Regulation. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with the procedure laid down in Article 15 of Regulation (EU) No 1095/2010.’

Explanation The amendment aims at ensuring that the members of the ESCB are adequately involved in the preparation of draft implementing technical standards.

Amendment 23

Article 23(2)

‘2. After consultation with the authorities referred to in paragraph 3, ESMA shall recognise a CSD established in a third country that has applied for recognition to provide the services referred to in paragraph 1, where the following conditions are met: (a) the Commission has adopted a decision in accordance with paragraph 6; (b) the CSD is subject to effective authorisation and supervision ensuring a full compliance with the prudential requirements applicable in that third country; (c) cooperation arrangements between ESMA and the competent authorities in that third country have been established pursuant to paragraph 7.’ ‘2. After consultation with the authorities referred to in paragraph 3, ESMA shall recognise a CSD established in a third country that has applied for recognition to provide the services referred to in paragraph 1, where the following conditions are met: (a) the Commission has adopted a decision in accordance with paragraph 6; (b) the CSD is subject to effective authorisation, supervision and oversight or, if the securities settlement system is operated by a central bank, oversight, ensuring full compliance with the prudential requirements applicable in that third country; (c) cooperation arrangements between ESMA and the relevant authorities in that third country have been established pursuant to paragraph 7.’

Explanation The amendment aims at ensuring that the condition under point (b) applies to third country CSDs operated by central banks that are subject to oversight only, as is the case currently with some CSDs operated by NCBs in the Union. Paragraph 2(c) should include central banks both in their capacity as overseers and as central banks of issue.

Amendment 24

Article 23(3)

‘3. When assessing whether the conditions referred to in paragraph 2 are met, ESMA shall consult with: (a) the competent authorities of the Member States in which the third country CSD intends to provide CSD services; (b) the competent authorities supervising CSDs established in the Union with whom a third country CSD has established links; (c) the authorities referred to in point (a) of Article 11(1); (d) the authority in the third country competent for authorising and supervising CSDs.’ ‘3. When assessing whether the conditions referred to in paragraph 2 are met, ESMA shall consult with: (a) the competent authorities of the Member States in which the third country CSD intends to provide CSD services; (b) the competent authorities supervising CSDs established in the Union with whom a third country CSD has established links; (c) the authorities referred to in Article 11(1); (d) the authority in the third country competent for authorising and supervising CSDs.’

Explanation The amendment aims at ensuring that the relevant central bank of issue is involved in the assessment by ESMA in line with the CPSS-IOSCO principles.

Amendment 25

Article 25(5)

‘5. A CSD shall clearly determine the roles and responsibilities of the board and shall make the minutes of the board meetings available to the competent authority.’ ‘5. A CSD shall clearly determine the roles and responsibilities of the board and shall make the minutes of the board meetings available to the competent authority and the auditor.’

Explanation The amendment makes this provision consistent with Article 25(3) of EMIR.

Amendment 26

Article 28(5)

‘5. Paragraphs 1 to 4 shall not apply where a CSD outsources some of its services or activities to a public entity and where that outsourcing is governed by a dedicated legal, regulatory and operational framework which has been jointly agreed and formalised by the public entity and the relevant CSD and agreed by the competent authorities on the basis of the requirements established in this Regulation.’ ‘5. Paragraphs 1 to 4 shall not apply where a CSD outsources some of its services or activities to a public entity and where that outsourcing is governed by a dedicated legal, regulatory and operational framework which has been jointly agreed and formalised by the public entity and the relevant CSD and endorsed by the competent authorities of the relevant CSD.’

Explanation The amendment introduces editorial suggestions. In addition, it is proposed to delete the last part of the sentence, since no specific requirements are provided for in the proposed regulation for the development of this operational framework.

Amendment 27

Article 35

‘1. For each securities settlement system it operates a CSD shall keep records and accounts that shall enable it, at any time and without delay, to distinguish in the accounts with the CSD the securities of a participant from the securities of any other participant and, if applicable, from the CSD's own assets. 2. A CSD shall keep records and accounts that enable a participant to distinguish the securities of that participant from those of that participant's clients. 3. A CSD shall offer to keep records and accounts enabling a participant to distinguish the securities of each of that participant's clients, if and as required by that participant (“individual client segregation”). […]’ ‘1. For each securities settlement system it operates a CSD shall keep records and accounts that shall enable it, at any time and without delay, to segregate in the accounts with the CSD the securities of a participant from the securities of any other participant and, if applicable, from the CSD’s own assets. 2. A CSD shall keep records and accounts that enable a participant to segregate the securities of that participant from those of that participant's clients. 3. A CSD shall offer to keep records and accounts enabling a participant to segregate the securities of each of that participant's clients, if and as required by that participant (“individual client segregation”). […]’

Explanation The amendment aims at clarifying that securities held by clients should be segregated from the securities of the CSD and of other clients. This is consistent with principle 11 of the CPSS-IOSCO principles.

Amendment 28

Article 36(6)

‘6. A CSD shall achieve settlement finality no later than by the end of the business day of the intended settlement date. Upon demand by its user committee, it shall install systems that allow for intraday or real-time settlement.’ ‘6. A CSD shall achieve settlement finality no later than by the end of the business day of the intended settlement date. Upon demand by its user committee, it shall install operational procedures that allow for intraday or real-time settlement.’

Explanation In the context of the proposed regulation, the term ‘system’ has a specific meaning, as defined in Article 2 of Directive 98/26/EC. The amendment aims at avoiding any unintended interpretations of the term ‘system’.

Amendment 29

Article 37(1)

‘1. For transactions denominated in the currency of the country where the settlement takes place, a CSD shall settle the cash payments of its respective securities settlement system through accounts opened with a central bank operating in such currency whenever practical and available.’ ‘1. For transactions denominated in the currency of the country where the settlement takes place, a CSD shall settle the cash payments of its respective securities settlement system through accounts opened with the central bank of issue of that currency whenever practical and available.’

Explanation On the basis of safeguarding the safety and efficiency of settlement and in line with CPSS-IOSCO principles, this provision needs to be completed by providing that for transactions denominated in the currency of the country of the settlement, CSDs should settle in central bank money, whenever practical and feasible. The amendment aims at specifying that the cash settlement accounts should be opened with the central bank of issue of the currency, rather than any central bank operating in such currency.

Amendment 30

Article 39 of the proposed regulation

‘A CSD shall adopt a sound risk-management framework for comprehensively managing legal, business, operational and other risks.’ ‘A CSD shall adopt a sound risk-management framework for comprehensively managing legal, business, operational, systemic and other risks.’

Explanation CSDs are deemed to be systemically important market infrastructures. For this reason, the prudential requirements applicable to them should aim to address systemic risk.

Amendment 31

Article 40(2)

‘2. A CSD shall design its rules, procedures and contracts so as they can be enforced in all relevant jurisdictions, including in the case of the default of the participant.’ ‘2. A CSD shall design its rules, procedures and contracts so as they can be enforced in the case of the default of the participant.’

Explanation The amendment is editorial. Enforceability of rules, procedures and contracts already implies their enforceability in all relevant jurisdictions.

Amendment 32

Article 45(4)

‘4. In case of a provisional transfer of securities between linked CSDs, retransfer of securities prior to the first transfer becoming final shall be prohibited.’ ‘4. In case of a provisional transfer of securities between linked CSDs, retransfer or onward transfer to a third CSD of securities prior to the first transfer becoming final shall be prohibited.’

Explanation This amendment addresses problems relating to the possible creation of securities where a provisional transfer is cancelled and the provisionally transferred securities are transferred into another CSD. These risks relate to the integrity of the issue.

Amendment 33

Article 45(8a) (new)

[No text] ‘A CSD shall provide appropriate account structures to enable participants, including other CSDs, to connect to its systems. The account structure shall be supported by the appropriate settlement, custody and fiscal arrangements.’

Explanation Unless appropriate accounts structures are offered by a CSD to which another CSD is linked, in the form of omnibus accounts structures, for example, the proper functioning of the link between these CSDs is not possible.

Amendment 34

Article 45(9)

‘9. ESMA shall develop in consultation with the members of the ESCB draft regulatory technical standards to specify the conditions as provided in paragraph 3 under which each type of link arrangement provides for adequate protection of the linked CSDs and of their participants, in particular when a CSD intends to participate in the securities settlement system operated by another CSD, the monitoring and managing of additional risks referred to in paragraph 5 arising from the use of intermediaries, thereconciliation methods referred to in paragraph 6, the cases where DVP settlement through links is practical and feasible as provided in paragraph 7 and the methods of assessment thereof.’ ‘9. ESMA shall develop in close cooperation with the members of the ESCB draft regulatory technical standards to specify the conditions as provided in paragraph 3 under which each type of link arrangement provides for adequate protection of the linked CSDs and of their participants, in particular when a CSD intends to participate in the securities settlement system operated by another CSD, the monitoring and managing of additional risks referred to in paragraph 5arising from the use of intermediaries, the reconciliation methods referred to in paragraph 6, the cases where DVP settlement through links is practical and feasible as provided in paragraph 7, the provisions of paragraph [8a] on the appropriate account structures including the relevant arrangements and the methods of assessment thereof.’

Explanation The purpose of the amendment is to provide for the adoption of technical standards by ESMA with respect to account structures for CSD links.

Amendment 35

Article 46

‘1. Any question with respect to proprietary aspects in relation to financial instruments held by a CSD shall be governed by the law of the country where the account is maintained. 2. Where the account is used for settlement in a securities settlement system, the applicable law shall be the one governing that securities settlement system. 3. Where the account is not used for settlement in a securities settlement system, that account shall be presumed to be maintained at the place where the CSD has its habitual residence as determined by Article 19 of Regulation (EC) No 593/2008 of the European Parliament and the Council. 4. The application of the law of any country specified in this Article shall comprise the application of the rules of law in force in that country other than its rules of private international law.’ ‘1. Without prejudice to Article 2(a), Article 9 and Article 10 of Directive 98/26/EC, any question with respect to proprietary aspects in relation to financial instruments held by a CSD shall be governed by the law of the country where the account is maintained. The account shall be presumed to be maintained at the place where the CSD has its habitual residence as determined by Article 19 of Regulation (EC) No 593/2008 of the European Parliament and the Council. 2. Where the law of the Member State where the account is maintained differs from the law governing the securities settlement system, and the securities settlement system has been designated in accordance with Article 2 of Directive 98/26/EC, the applicable law shall be the one governing that securities settlement system. 3. The application of the law of any country specified in this Article shall comprise the application of the rules of law in force in that country other than its rules of private international law.’

Explanation The proposed regulation provides for an exception to the principal rule set out in Article 46(1) and allows for a choice of law in relation to any account used for settlement in a securities settlement system. The notion of securities settlement system is defined as a formal arrangement governed by the law of a Member State chosen by the participants (3). Consequently, since participants are able to choose the law applicable to a securities settlement system, the law governing a securities settlement system, as referred to in Article 46(2) of the proposed regulation, is subject to a choice of law and may differ from the law of the place of establishment of the CSD. This creates legal uncertainty as to the applicable law with respect to securities settled on the accounts of a CSD. The amendment aims at limiting the scope of choice of law while catering for certain specific cases where the law of the Member State where the accounts are maintained differs from the law governing the rules of the securities settlement system.

Amendment 36

Article 52(2)

‘2. […] Following a detailed impact assessment, a consultation of the undertakings concerned and after taking into accountthe opinions of the EBA, the ESMA and the ECB, the Commission shall adopt an implementing decision in accordance with the procedure referred to in Article 66. The Commission shall give reasons for its implementing decision. […]’ ‘2. […] Following a detailed impact assessment, a consultation of the CSD concerned and after taking intoaccount the opinions of the EBA, the ESMA, the ECB, and the supervisory authorities and the assessment of the ESRB, the Commission shall adopt an implementing decision in accordance with the procedure referred to in Article 66. The Commission shall give reasons for its implementing decision. […]’

Explanation The amendment clarifies that the undertakings concerned are CSDs, and that the ESRB would also provide the Commission with its assessment.

Amendment 37

Article 52(3)

‘3. A CSD that intends to settle the cash leg of all or part of its securities settlement system in accordance with Article 37(2) of this Regulation shall obtain authorisation to designate for this purpose an authorised credit institution as provided in Title II of Directive 2006/48/EC, unless the competent authority referred to in Article 53(1) of this Regulation demonstrates, based on the available evidence, that the exposure of one credit institution to the concentration of risks under Article 57(3) and (4) of this Regulation is not sufficiently mitigated. In the latter case, the competent authority referred to in Article 53(1) may require the CSD to designate more than one credit institution. The designated credit institutions shall be considered as settlement agents.’ ‘3. A CSD that intends to settle the cash leg of all or part of its securities settlement system in accordance with Article 37(2) of this Regulation shall obtain authorisation to designate for this purpose an authorised credit institution as provided in Title II of Directive 2006/48/EC, unless the competent authority referred to in Article 53(1) of this Regulation demonstrates, based on the available evidence, that the exposure of one credit institution to the concentration of risks under Article 57(3) and (4) of this Regulation is not sufficiently mitigated. In the latter case, the competent authority referred to in Article 53(1) may require the CSD to designate more than one credit institution. The designated credit institutions shall be considered as settlement agents as defined in Article 2(d) of Directive 98/26/EC.’

Explanation The amendment aims at clarifying that a designated credit institution is to be considered a settlement agent within the meaning of Directive 98/26/EC for the cash leg of securities transactions, thereby providing finality to transfer orders relating to that cash leg.

Amendment 38

Article 53(5)

‘5. ESMA shall develop in consultation with the members of the ESCB draft regulatory technical standards to specify the information that the applicant CSD shall provide to the competent authority. […]’ ‘5. ESMA shall develop in close cooperation with the members of the ESCB and EBA draft regulatory technical standards to specify the information that the applicant CSD shall provide to the competent authority. […]’