Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC
Date: 2012-03-07
Institutions: European Commission
Subjects: data protection, financial institution, financial legislation, issue of securities, legal status, market capitalisation, official market, sales agent, securities, single market, stock-exchange transaction

EUROPEAN COMMISSION 

Brussels, 7.3.2012  
COM(2012) 73 final 

2012/0029 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on improving securities settlement in the European Union and on central securities 
depositories (CSDs) and amending Directive 98/26/EC 

(Text with EEA relevance) 

{SWD(2012) 22 final} 
{SWD(2012) 23 final} 

 
 
  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

The  Central  Securities  Depositories  (CSDs)  are  systemically  important  institutions  for  the 
financial markets. Any trade of securities on or off a securities exchange is followed by post-
trade  processes  that  lead  to  the  settlement  of  that  trade,  which  is  the  delivery  of  securities 
against cash. The CSDs are the key institutions that enable settlement by operating so-called 
securities  settlement  systems.  CSDs  also  ensure  the  initial  recording  and  the  central 
maintenance  of  securities  accounts  that  record  how  many  securities  have  been  issued  by 
whom and each change in the holding of those securities. 

CSDs  also  play  a  crucial  role  for  the  collateral  market  especially  for  monetary  policy 
purposes. For instance, almost all of the eligible collateral for central bank monetary policy 
operations in the EU, especially in the Euro area, flows through securities settlement systems 
operated by CSDs. 

Securities  settlement  systems  in  the  EU  settled  approximately  €920  trillion  worth  of 
transactions in 2010, and held almost €39 trillion  of securities at the end of 2010. There are 
over 30 CSDs in the EU, generally one in each country, and two 'international' CSDs (ICSDs 
– Clearstream Banking Luxembourg and Euroclear Bank), which are a sub-category of CSDs 
specialised in the issuance of international bonds, commonly known as "Eurobonds".  

While generally safe and efficient within national borders, CSDs combine and communicate 
less  safely  across  borders,  which  means  that  an  investor  faces  higher  risks  and  costs  when 
making a cross-border investment. For example, the number of settlement fails is higher for 
cross-border transactions than for domestic transactions and cross-border settlement costs are 
up to four times higher than domestic settlement costs. 

These safety problems are the result of a number of factors, including:  

•  The  length  of  the  settlement  cycle.  The  time  between  trade  and  settlement  is  not 

harmonised in the EU, creating disruptions when securities are settled cross-border; 

•  A small but substantial proportion of securities still exist in paper form. These are settled 

after a much longer settlement cycle, which increases the risk incurred by investors;  

•  Settlement fails, which are situations where a transaction fails to be settled on the intended 
settlement  date,  are  not  subject  to  deterrent  penalties  in  all  markets  and  where  they  exist 
settlement discipline measures differ widely between markets; 

•  While  Directive  98/26/EC  on  settlement  finality  in  payment  and  securities  settlement 
systems  (SFD)1  reduces  the  disruption  to  a  securities  settlement  system  caused  by 
insolvency proceedings against a participant in that system, it does not address other risks 
of the system or the resilience of the CSD operating the system. Some CSDs are subject to 

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OJ L166, 11.6.1998, p. 45 

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additional  credit  and  liquidity  risks  derived  from  the  provision  of  banking  services 
ancillary to settlement; 

•  Agreements  between CSDs to  link-up, while being considered as a first step  towards the 
consolidation of the European settlement markets, raise safety concerns in the absence of 
specific  prudential  rules  for  such  links.  In  addition,  they  increase  the  interconnectedness 
between CSDs, which justifies further the introduction of a common prudential framework. 

The  absence  of  an  efficient  single  internal  market  for  settlement  also  raises  important 
concerns. Important barriers to the European post trading market continue to exist, such as for 
instance  the  limitation  of  securities  issuers'  access  to  CSDs,  different  national  licensing 
regimes and rules for CSDs across the EU and limited competition between different national 
CSDs. These barriers result in a very fragmented market. As a consequence, the cross-border 
settlement  of  transactions  relies  on  unnecessarily  complex  holding  'chains'  often  involving 
several CSDs and several other intermediaries. This has a negative impact on the efficiency, 
but also on the risks associated with cross-border transactions. 

These  problems  are  important  as  cross-border  transactions  in  Europe,  ranging  from  usual 
purchases/sales  of  securities  to  collateral  transfers,  continue  to  increase  and  CSDs  become 
increasingly  interconnected.  These  trends  are  expected  to  accelerate  with  the  advent  of 
Target2  Securities  (T2S),  a  project  launched  by  the  Eurosystem  to  provide  a  borderless 
common platform for securities settlement in Europe, which is scheduled to start in 2015. 

This  proposed  Regulation  addresses  these  problems.  It  introduces  an  obligation  to represent 
all transferable securities in book entry form and to record these in CSDs before trading them 
on  regulated  venues.  It  harmonises  settlement  periods  and  settlement  discipline  regimes 
across  the  EU.  It  introduces  a  common  set  of  rules  inspired  by  international  standards 
addressing the risks of the CSDs' operations and services. As CSDs will be subject to identical 
substantive rules across the EU, they will benefit from uniform requirements for licensing and 
an EU wide passport, which will help remove the existing barriers of access.  

The proposed Regulation will therefore increase safety in the system and open the market for 
CSD  services,  therefore  improving  the  efficiency  of  securities  settlement.  The  proposed 
Regulation  will  complete  the  regulatory  framework  for  securities  market  infrastructures, 
alongside the Directive 2004/39/EC on markets in financial instruments (MiFID) 2 for trading 
venues,  and  the  proposal  for  a  Regulation  on  derivative  transactions  (EMIR)  for  Central 
Counterparties (CCPs). 

This initiative has received wide political support. The ECOFIN Council of 2 December 2008 
emphasised the need to strengthen the safety and soundness of securities settlement systems 
operated by CSDs and agreed that EU legislation is needed to address legal barriers relating to 
post-trading,  including  barriers  of  access  to  CSDs.  The  need  for  appropriate  standards  for 
CSDs is also agreed internationally. As early as 2001 global banking and securities regulators 
(CPSS-IOSCO)  adopted  a  set  of  recommendations  for  securities  settlement  systems.  These 
were adapted through non-binding guidelines by European regulators (ESCB-CESR) in 2009. 
In  October  2010  the  Financial  Stability  Board  re-iterated  the  call  for  updated  standards  for 

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OJ L 145, 30.4.2004, p. 1 

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more  robust  core  market  infrastructures  and  asked  for  the  revision  and  enhancement  of 
existing standards.  

2. 

RESULTS  OF  CONSULTATIONS  WITH  THE  INTERESTED  PARTIES  AND  IMPACT 
ASSESSMENT 

This initiative is the result of an extensive and continuous dialogue and consultation with all 
major  stakeholders,  including  securities  and  banking  regulators,  the  ECB  and  all  types  of 
market  participants.  It  takes  into  consideration  the  views  expressed  in  a  public  consultation 
from  13  January  to  1  March  2011,  and  the  input  obtained  through  a  broad  range  of 
stakeholder groups since summer 2010.  

In addition, an external study of costs and prices in the post trading sector was commissioned 
from  Oxera  Consulting.  Oxera  delivered  a  first  report  in  2009  and  a  second  one  in  2011. 
These  reports  provide  useful  data  on  the  cost  gaps  between  cross-border  and  domestic  post 
trading costs in Europe. 

In line with its "Better Regulation" policy, the Commission conducted an impact assessment 
of  policy  alternatives.  Policy  options  were  assessed  against  the  key  objectives  of  increasing 
the safety, efficiency and level playing field for CSD services in Europe. The assessment was 
done  by  considering  the  effectiveness  of  achieving  the  objectives  above  and  the  cost 
efficiency of implementing different policy options.  

The  draft  impact  assessment  report  was  submitted  on  16  March  2011  to  the  Commission's 
Impact Assessment Board (IAB), followed by a resubmission of a revised draft on 8 August 
2011.  The  draft  report  was  considerably  improved  following  the  comments  of  the  IAB  by 
strengthening the evidence base underlying the problems found and the analysis of different 
policy  options,  in  particular  with  respect  to  banking  services  ancillary  to  settlement  and  by 
including an estimation of the overall benefits and of the impact of different policy options on 
different  stakeholder  groups  and  a  clearer  and  more  robust  monitoring  and  evaluation 
framework.  

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

3.1. 

Legal basis 

The proposal is based on Article 114 of the Treaty on the Functioning of the European Union 
('TFEU')  as  the  most  appropriate  legal  basis  in  this  field.  The  proposal  aims  principally  at 
addressing the lack of safety and efficiency of securities settlement and the resulting obstacles 
to the functioning of the internal market resulting from the divergent national rules regulating 
securities  settlement  and  the  activities  of  the  CSDs,  which  operate  securities  settlement 
systems,  by  introducing  a  set  of  common  rules  concerning  certain  aspects  of  the  settlement 
cycle  and  discipline,  as  well  as  a  set  of  common  prudential  requirements  addressing  the 
resilience  of  and  access  to  CSDs..  In  the  absence  of  such  common  rules  and  requirements, 
likely  divergent  measures  taken  at  national  level  will  have  a  direct  negative  impact  on  the 
safety,  efficiency  and  competition  in  the  settlement  markets  in  the  Union.  A  regulation  is 
considered  to  be  the  most  appropriate  instrument  to  ensure  that  all  market  participants  are 
subject  to  uniform  and  directly  applicable  obligations  regarding  the  settlement  cycle  and 
discipline, and that CSDs are subject to uniform and directly applicable prudential standards 

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in  the  Union,  which  should  reinforce  their  resilience  and  central  role  in  the  maintenance  of 
book-entry systems and in the settlement process.  

As the main purpose of the proposed Regulation is to introduce a number of legal obligations 
imposed  directly  on  market  operators  consisting,  inter  alia,  in  the  recording  of  virtually  all 
transferable  securities  in  book-entry  form  in  a  CSD  and  a  stricter  time  frame  for  settlement 
and  as  CSDs  are  responsible  for  the  operation  of  securities  settlement  systems  and  the 
application of measures to provide timely settlement in the Union, it is essential that all CSDs 
constantly comply at all times with uniform and stringent prudential requirements provided in 
the proposal. It is therefore necessary to include in this proposal a set of uniform and directly 
applicable rules regarding the authorisation and ongoing supervision of CSDs, as a corollary 
to the legal obligations imposed on market operators. 

3.2. 

Subsidiarity and proportionality 

According to the principle of subsidiarity provided in Article 5(3) of the Treaty on European 
Union,  action  at  Union  level  should  be  taken  only  when  the  aims  envisaged  cannot  be 
achieved sufficiently by Member States alone and can, because of the scale or effects of the 
proposed action, be better achieved by the EU.  

This  proposal  essentially  aims  at  making  the  European  securities  market  safer  and  more 
efficient  within  the  Union,  which  calls  for  a  coordinated  EU  action.  The  Union  action  is 
further  justified  by  the  systemic  nature  of  CSDs  and  their  increasing  interconnection,  in 
particular after the introduction of T2S.  

As regards authorisation and supervision of CSDs, the proposed Regulation aims at striking a 
balance between the competences of national authorities and the interests of other competent 
authorities. The European Securities and Markets Authority (ESMA) will play a key role in 
resolving disputes, facilitating the cooperation arrangements between national authorities and 
developing technical standards in close consultation with the members of European System of 
Central Banks (ESCB). 

Certain  issues  are  already  covered  by  existing  Union  legislation.  For  instance,  securities 
settlement  systems  are  already  defined  by  Directive  98/26/EC  on  settlement  finality  in 
payment and securities settlement systems3 and Directive 2004/39/EC (MiFID) provides for 
certain  rules  of  access  by  market  participants  to  the  securities  settlement  system  of  their 
choice. The proposed Regulation is consistent with these Union texts.  

The proposal also takes full account of the principle of proportionality required in Article 5(4) 
of the Treaty on European Union, namely that Union action should be adequate to reach the 
objectives pursued and should not go beyond what is necessary. The proposed Regulation is 
compatible with this principle and strikes the right balance between the public interest at stake 
and the cost-efficiency of the measures proposed. The proposal has taken full account of the 
need to balance safety, efficiency of the markets and costs for the stakeholders. 

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3.3. 

Detailed explanation of the proposal 

The proposed Regulation has two main parts: measures addressing all market operators in the 
context  of  securities  settlement  (Title  II)  and measures  addressing  specifically  CSDs  (Titles 
III,  IV  and  V).  The  remaining  titles,  on  scope  and  definitions  (Title  I)  and  transitional  and 
final provisions (Title VI) apply to both parts of the proposal. 

3.3.1. 

Scope of proposal (Title I) 

The  proposed  Regulation  covers  all  CSDs,  but  exempts  from  the  authorisation  and 
supervision  requirements  the  members  of  the  ESCB  and  other  national  or  public  bodies 
performing  similar  services,  such  as  the  Member  States  national  bodies  charged  with  or 
intervening  in  the  management  of  the  public  debt,  that  would  otherwise  qualify  as  CSDs. 
These institutions nevertheless remain subject to the full set of requirements for CSDs. They 
are exempt from Title IV, which imposes the segregation between banking services ancillary 
to  settlement  and  other  CSD  services  since  these  institutions,  by  their  very  nature,  provide 
such ancillary services. 

Regarding  financial  instruments,  the  proposal  covers  all  financial  instruments  as  far  as  the 
requirements for CSDs are concerned, but it mainly covers transferable securities as defined 
in point (18) of Article 4(1) of Directive 2004/39/EC (MiFID) (essentially shares and bonds) 
for the purposes of Title II on securities settlement. 

3.3.2. 

Securities settlement (Title II) 

A  key  objective  of  the  proposed  Regulation  consists  in  increasing  the  safety  of  settlement. 
Title II includes three sets of measures to achieve this objective. First, it imposes the so-called 
dematerialisation/immobilisation  of  securities,  which  is  the  issuance  of  securities  in  book-
entry  form.  This  measure  is  aimed  at  increasing the efficiency  of settlement, facilitating the 
shortening  of  settlement  periods  and  ensuring  the  integrity  of  a  securities  issue  by  allowing 
for easier reconciliation of securities holdings. Book entry securities do not necessarily need 
to  be  recorded  in  a  CSD  before  they  are  traded  or  given  as  collateral.  They  may  be,  for 
instance, recorded by registrars. However, if they are traded on venues regulated by Directive 
2004/39/EC  (MiFID),  they  need  to  be  recorded  in  a  CSD,  in  order  to  benefit  from  the 
protection for securities settlement systems under Directive 98/26/EC and in order to facilitate 
reconciliation between securities recorded, on the one hand, and securities traded, on the other 
hand.  The  proposed  Regulation  provides  for  a  sufficiently  long  transitional  period,  until  1 
January 2018, in order to allow market operators from the Member States where significant 
amounts of paper securities still exist to comply with this measure. 

Second, Title II harmonises the settlement period for the securities transactions across the EU. 
In  Europe  most  securities  transactions  are  settled  either  two  or  three  days  after  the  trading 
day, depending on each market. The settlement period will be harmonised and set at two days 
after  the  trading  day,  although  shorter  settlement  periods  will  be  allowed.  Third,  Title  II 
harmonises settlement discipline measures across the EU. These consist of ex ante measures 
to prevent settlement fails, and ex post measures to address settlement fails. The key objective 
is  to  reduce  settlement  fails  and  to  discourage  any  competition  lowering  the  standards  for 
settlement discipline, for instance between markets that may have different penalties systems 
in  place.  The  proposed  provisions  go  beyond  the  level  of  CSDs  and  aim  to  subject  market 
participants that fail to deliver securities on the intended settlement date to a harmonised 'buy-

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in'  procedure,  which  may  be  executed  by  a  CCP,  in  the  case  of  a  cleared  transaction,  or 
otherwise included in trading venues own rules.  

3.3.3.  CSDs (Title III) 

Authorisation and supervision of CSDs (Chapter I) 

Directive  98/26/EC  defines  already  securities  settlement  systems  as  formal  arrangements 
allowing  transfers  of  securities  between  different  participants.  However,  that  directive  does 
not address the institutions which are responsible for operating such systems. In view of the 
increasing  complexity  of  such  systems  and  risks  related  to  settlement,  it  is  essential  that 
institutions  operating  securities  settlement  systems  are  legally  defined,  authorised  and 
supervised  along  a  set  of  common  prudential  standards.  A  CSD  is  defined  as  being  a  legal 
person that operates a securities settlement system and at least one other core service (either 
'notary' service or central maintenance service). In addition, CSDs would only be permitted to 
perform certain 'ancillary' services, which are mostly related to the core services. Where such 
ancillary services include tax services, CSDs would need to ensure that they comply with the 
tax  legislation  of  the  Member  States  concerned.  In  the  case  of  withholding  tax  relief 
procedures, CSDs would need to observe any requirements that the Member State of source of 
the  payments  subject  to  withholding  tax  imposes  on  financial  intermediaries  in  order  to 
authorise  them  to  apply  the  withholding  and  claim  withholding  tax  relief  on  behalf  of  the 
beneficial  owners  of  the  payments.  This  may  in  particular  involve  the  obligation  to  report 
investor  information  directly  to  the  source  Member  State  (in  return  for  being  able  to  claim 
relief from withholding taxes at source), which may in turn pass it on to the Member State of 
residence of the beneficial owner of financial instruments. 

CSDs will have to be authorised and supervised by national competent authorities of the place 
where they are established. However, in view of the increasing cross-border element of their 
activity, other authorities, related to the securities settlement system(s) operated by the CSD 
and to other group entities would have to be consulted. ESMA will have an important role in 
developing  draft  technical  standards  to  harmonise  the  authorisation  process  and  to  ensure 
cooperation between authorities. 

The proposal grants authorised CSDs a "passport" to provide services in the Union, either by 
providing  directly  a  service  in  another  Member  State  or  by  establishing  a  branch  in  that 
Member  State.  A  CSD  from  a  third  country  can  be  granted  access  to  the  Union  if  it  is 
recognised  by  ESMA.  Such  recognition  may  be  granted  only  when  the  Commission  has 
ascertained that the legal and supervisory framework of that third country is equivalent to the 
Union  one  and  that  the  third  country  provides  for  a  effective  equivalent  recognition  of  the 
Union  regulatory  and  supervisory  framework;  the  CSD  is  subject  to  effective  authorisation 
and  supervision  in  that  third  country;  and  cooperation  arrangements  are  in  place  between 
ESMA and that third country authorities. 

Requirements for CSDs and conflict of law (Chapters II and III) 

Since CSDs are systemically important and perform critical services for the securities market, 
they must be subject to high prudential standards to ensure their viability and the protection of 
their participants. The requirements for CSDs are grouped into several categories in Chapter 
II:  organisational  requirements  (Section  1),  conduct  of  business  rules  (Section  2), 
requirements  for  CSD  services  (Section  3),  prudential  requirements  (Section  4)  and 
requirements for CSD links (Section 5). 

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Section  1  requires  CSDs  to  have  robust  governance  arrangements,  experienced  and  suitable 
senior  management,  board  and  shareholders,  and  to  set  up  user  committees  representing 
issuers and participants for each securities settlement system. Any outsourcing of services or 
activities should not compromise the responsibility of a CSD towards participants or issuers 
or the exercise of supervisory and oversight functions by different authorities. An important 
exception  is  foreseen  for  outsourcing  arrangements  with  public  entities,  such  as  the  T2S 
project operated by the Eurosystem, which are governed by a dedicated framework agreed by 
the competent authorities. 

Section 2 introduces important requirements for CSDs to have non-discriminatory, transparent 
and  strictly  risk-based  criteria  for  participation  to  securities  settlement  systems.  These 
requirements  are  reinforced  by  the  provisions  on  access  set  out  in  Chapter  IV.  It  also 
introduces  important  principles  on  transparency  regarding  public  disclosure  of  prices  and 
disclosure to the competent authorities of costs and revenues by service provided. 

Section  3,  in  Article  34  on  requirements  for  CSD  services,  recognises  the  important  role 
played by CSDs in ensuring the integrity of a securities issue and includes obligations about 
intraday  reconciliation  of  accounts.  In  terms  of  account  segregation  for  the  purpose  of 
protecting  participants'  assets,  the  proposal  goes  beyond  the  requirements  provided  in 
Directive  2004/39/EC  (MiFID)  and  requires  CSDs  to  segregate  the  accounts  of  each 
participant  from  those  of  other  participants  and  to  enable  participants  to  segregate  the 
accounts of each of the participants' clients. Regarding cash settlement, the proposal requires 
CSDs to settle on central bank accounts whenever practical and available. Commercial bank 
money settlement is allowed, however, contrary to some current practices, it must be done via 
a separate credit institution that acts as settlement agent. 

The  prudential  requirements  for  the  CSDs  themselves  in  Section  4  include  important 
provisions  on  the  mitigation  of  operational  risk.  Since  CSDs  would  not  be  permitted  to 
perform  banking  type  of  services  directly,  the  key  risk  CSDs  will  face  is  operational  risk. 
These  provisions  include  appropriate  measures  to  ensure  the  continuity  of  operations, 
including settlement, at all times. Capital requirements are also set by reference to operating 
expenses  –  CSDs  should  hold  capital,  retained  earnings  and  reserves  to  cover  at  least  six 
months of operating expenses. 

As CSDs are increasingly interconnected and this process is expected to accelerate with the 
advent  of  T2S,  Article  45  provides  for  important  prudential  requirements  for  linked  CSDs, 
including the setting up of identical settlement finality rules.  

Chapter  III  aims  at  increasing  the  legal  certainty  for  securities  transactions,  by  proposing  a 
conflict-of-law rule with respect to proprietary aspects for securities held by a CSD. 

Access to CSDs (Chapter IV) 

Opening  up  the  market  for  CSD  services  and  removing  barriers  of  access  is  one  of  the 
objectives  of  this  initiative.  Chapter  IV  addresses  three  types  of  access:  (a)  between  issuers 
and CSDs, (b) between CSDs, and (c) between CSDs and other market infrastructures. 

In many Member States issuers are required by law to issue certain types of securities, most 
notably shares, in the national CSD. Article 47 introduces the right of issuers to record their 
securities  in  any  CSD  authorised  in  the  Union  as  well  as  the  right  for  CSDs  to  provide 
services  for  securities  that  have  been  constituted  under  the  law  of  another  Member  State. 

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National specificities are respected by recognising that this right should be without prejudice 
to the corporate law under which the securities are constituted.  

Sections 2 and 3 lay down the principles on access. A CSD should have the right to become a 
participant in a securities settlement system of another CSD based on non-discriminatory and 
risk-based  principles.  A  CSD  should  also  have  the  right,  based  on  the  same  principles,  to 
request  another  CSD  to  develop  special  functions,  which  should  be  charged  on  a  'cost-plus' 
basis.  Similarly,  a  CSD  should  have  the  right  to  receive  transaction  feeds  from  CCPs  and 
trading  venues  and  those  infrastructures  should  have  access  to  securities  settlement  systems 
operated by CSDs. Any disputes between the relevant competent authorities could be referred 
to ESMA for dispute resolution. 

3.3.4.  Credit institutions designated to act as settlement agents (Title IV) 

As  described  before,  when  central  bank  settlement  is  not  practical  or  available,  CSDs  may 
offer  commercial  bank  money  settlement  to  their  participants.  However,  CSDs  should  not 
provide the banking services ancillary to settlement themselves, but should be authorised by 
their competent authorities to designate a credit institution to act as settlement agent to open 
cash  accounts  and  grant  credit  facilities  to  facilitate  settlement  unless  the  competent 
authorities  demonstrate,  based  on  the  available  evidence,  that  the  exposure  of  one  credit 
institution to the concentration of credit and liquidity risks is not sufficiently mitigated. This 
separation  between  CSDs  and  settlement  agents  is  an  important  measure  to  address  and 
increase  the  safety  of  CSDs.  Banking  services  ancillary  to  settlement  increase  the  risks  to 
which  CSDs  are  exposed  and  therefore  the  likelihood  of  CSDs  suffering  a  default  or  being 
subject  to  severe  stress.  While  the  banking  services  are  usually  provided  by  some  CSDs  on 
intraday basis and are limited to the services ancillary to settlement, the amounts handled are 
however significant and any default of such CSDs would have negative consequences for the 
securities  and  payments  markets.  The  requirement  to  provide  the  banking  services  in  a 
separate  legal  entity  than  the  one  which  provides  the  core  CSD  services  will  prevent  the 
transmission  of  risks  from  the  banking  services  to  the  provision  of  core  CSD  services,  in 
particular  in  case  of  insolvency  or  severe  stress  resulting  from  the  banking  services.  This 
requirement  will  also  provide  CSDs  and  public  authorities  with  more  options  to  find 
appropriate  solutions  in  case  of  default  of  the  settlement  agent  providing  banking  services. 
For the CSDs which currently provide banking services, the main costs associated with this 
measure  are  the  legal  costs  involved  in  the  setting-up  a  separate  legal  entity  for  providing 
banking services, while CSDs willing to develop such services in the future would not incur 
significant  incremental  costs  for  setting-up  of  a  separate  legal  entity.  There  are  no  less 
stringent alternatives to the separation of banking services, which would entirely eliminate the 
danger of transmission of risks from the banking services to the core CSD services.  

In  order  to  secure  the  efficiencies  resulting  from  the  provision  of  both  CSD  and  banking 
services  within  the  same  group  of  undertakings,  the  requirement  that  banking  services  be 
carried  out  by  a  separate  credit  institution  should  not  prevent  that  credit  institution  from 
belonging to the same group of undertakings as the CSD. However, if both CSD and banking 
services  are  provided  within  the  same  group  of  undertakings,  the  activities  of  the  credit 
institution providing banking services should be limited to the provision of banking services 
ancillary  to  settlement.  The  latter  restriction  aims  at  reducing  the  overall  risk  profile  of  the 
group resulting from the presence of a credit institution in that group. 

The competent authority should be able demonstrate on a case by case basis the absence of 
systemic risk incurred by the provision of both CSD and banking services by the same legal 

EN 

9 

   EN 

 
entity. In such a case, a reasoned request could be made to the European Commission which 
may authorise the derogation. In any case, the activities of a CSD licensed as credit institution 
should be limited to the provision of banking services ancillary to settlement.  

The  credit  institution  acting  as  settlement  agent  should  be  authorised  under  the  Directive 
2006/48/EC  relating  to  the  taking  up  and  pursuit  of  the  business  of  credit  institutions4. 
However, as securities settlement system(s) operated by CSDs should be protected as much as 
possible against any potential risks caused by settlement agents, such agents should comply 
with additional requirements to mitigate credit and liquidity risks in respect of each securities 
settlement system they serve.  

Considering  that  Directive  2006/48/EC  does  not  address  specifically  intraday  credit  and 
liquidity risks resulting from the provision of banking services ancillary to settlement, credit 
institutions  should  also  be  subject  to  specific  enhanced  credit  and  liquidity  risk  mitigation 
requirements that should apply to each securities settlement system in respect of which they 
act as settlement agents. The proposed requirements for the settlement agents are inspired by 
the  international  CPSS-IOSCO  standards  for  financial  market  infrastructures  and  by  current 
market  practices.  They  include  full  collateralisation  of  credit  exposures,  monitoring  of 
intraday  liquidity  taking  into  account  the  liquidity  risk  generated  by  the  default  of  the  two 
largest participants and concentration limits on liquidity providers.  

3.3.5. 

Sanctions (Title V) 

A  review  of  the  existing  sanctioning  powers  and  their  practical  application  aimed  at 
promoting  convergence  of  sanctions  across  the  range  of  supervisory  activities  has  been 
carried  out  in  the  Commission  Communication  'Reinforcing  sanctioning  in  the  financial 
services  sector'5.  A  stock  taking  of  the  national  regimes  in  place  has,  for  example,  revealed 
that  the  levels  of  pecuniary  sanctions  vary  widely  among  Member  States,  that  some 
competent authorities do not have certain important sanctioning powers at their disposal and 
that some competent authorities cannot impose sanctions on natural and legal persons. As a 
result,  the  Commission  now  proposes  that  Member  States  should  provide  that  appropriate 
administrative sanctions and measures can be applied to breaches of the Regulation. To this 
end,  a  minimum  set  of  administrative  sanctions  and  measures  should  be  available  to  the 
competent  authorities,  including  withdrawal  of  authorisation,  public  warnings,  dismissal  of 
management,  restitution  of  profits  gained  from  the  breaches  of  this  Regulation  where  those 
can  be  determined,  and  administrative  fines.  The  maximum  level  of  administrative  fines 
should  not  be  lower  than  the  level  provided  for  by  the  Regulation  –  10%  of  the  annual 
turnover  of  a  legal  entity  or  five  million  Euro  or  10%  of  the  annual  income  of  a  natural 
person.  When  determining  the  type  and  level  of  sanctions,  the  competent  authorities  should 
take into account a number of criteria set in the Regulation, including the size and financial 
strength of the responsible person, the impact of the violation and the cooperative behaviour 
of  the  responsible  person.  The  proposed  Regulation  does  not  prevent  individual  Member 
States from fixing higher standards. 

4 
5 

OJ L 177, 30.6.2006, p. 1 
COM(2010) 716, 8.12.2010 

EN 

10 

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3.3.6.  Compliance with Articles 290 and 291 TFEU 

On 23 September 2009, the Commission adopted proposals for Regulations establishing EBA, 
EIOPA, and ESMA. In this respect the Commission wishes to recall the Statements in relation 
to  Articles  290  and  291  TFEU  it  made  at  the  adoption  of  the  Regulations  establishing  the 
European  Supervisory  Authorities  according  to  which:  "As  regards  the  process  for  the 
adoption  of  regulatory  standards,  the  Commission  emphasises  the  unique  character  of  the 
financial services sector, following from the Lamfalussy structure and explicitly recognised in 
Declaration  39  to  the  TFEU.  However,  the  Commission  has  serious  doubts  whether  the 
restrictions  on  its  role  when  adopting  delegated  acts  and  implementing  measures  are  in  line 
with Articles 290 and 291 TFEU." 

4. 

BUDGETARY IMPLICATIONS 

The proposal has implications for the European Union budget related to the tasks allocated to 
ESMA, as specified in the legislative financial statements accompanying this proposal. 

EN 

11 

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2012/0029 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on improving securities settlement in the European Union and on central securities 
depositories (CSDs) and amending Directive 98/26/EC 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national Parliaments, 

Having regard to the opinion of the European Economic and Social Committee6, 

Having regard to the opinion of the European Central Bank7, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

Central  Securities  Depositories  (CSDs),  along  with  Central  Counterparties  (CCPs) 
contribute  to  a  large  degree  in  maintaining  post  trade  infrastructures  that  safeguard 
financial markets and give market participants confidence that securities transactions 
are  executed  properly  and  in  a  timely  manner,  including  during  periods  of  extreme 
stress.  

Due  to  their  position  at  the  end  of  the  settlement  process,  the  securities  settlement 
systems  operated  by  CSDs  are  of  a  systemic  importance  for  the  functioning  of 
securities  markets.  Being  situated  at  the  top  of  the  securities  holding  chain  through 
which  their  participants  report  the  securities  holdings  of  investors,  the  securities 
settlement  systems  operated  by  CSDs  also  serve  as  an  essential  tool  to  control  the 
integrity  of  an  issue,  playing  an  important  role  in  maintaining  investor  confidence. 
Moreover, securities settlement systems operated by CSDs are closely involved in the 
collateralisation  of  monetary  policy  operations  as  well  as  in  the  collateralisation 

6 
7 

OJ C , , p. . 
OJ C , , p. . 

EN 

12 

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process between credit institutions and are, therefore, important actors in the collateral 
markets. 

(3)  While Directive 98/26/EC of the European Parliament and of the Council of 19 May 
1998 on settlement finality in payment and securities settlement systems8 reduced the 
disruption to a securities settlement system caused by insolvency proceedings against 
a  participant  in  that  system,  it  is  necessary  to  address  other  risks  that  securities 
settlement  systems  are  facing,  as  well  as  the  risk  of  insolvency  or  disruption  in  the 
functioning of the CSDs that operate securities settlement systems. A number of CSDs 
are subject to credit and liquidity risks deriving from the provision of banking services 
ancillary to settlement. 

(4) 

(5) 

The  increasing  number  of  cross-border  settlements  as  a  consequence  of  the 
development  of  link  agreements  between  CSDs  calls  into  question  the  resilience,  in 
the  absence  of  common  prudential  rules,  of  CSDs  when  importing  the  risks 
encountered  by  CSDs  from  other  Member  States.  Moreover,  despite  the  increase  in 
cross-border settlements, the settlement markets in the Union remain fragmented and 
cross-border  settlement  more  costly,  due  to  different  national  rules  regulating 
settlement  and  the  activities  of  CSDs  and  limited  competition  between  CSDs.  This 
fragmentation  hinders  and  creates  additional  risks  and  costs  for  cross-border 
settlement.  In  the  absence  of  identical  obligations  for  market  operators  and  common 
prudential  standards  for  CSDs,  likely  divergent  measures  taken  at  national  level  will 
have  a  direct  negative  impact  on  the  safety,  efficiency  and  competition  in  the 
settlement markets in the Union. It is necessary to remove those significant obstacles 
in  the  functioning  of  the  internal  market  and  avoid  distortions  of  competition  and  to 
prevent  such  obstacles  and  distortions  from  arising  in  the  future.  Consequently,  the 
appropriate legal basis for this Regulation should be Article 114 of the Treaty on the 
Functioning  of  the  European  Union,  as  interpreted  in  accordance  with  the  consistent 
case law of the Court of Justice of the European Union. 

It  is  necessary  to  lay  down  in  a  Regulation  a  number  of  uniform  obligations  to  be 
imposed  on  market  participants  regarding  certain aspects of the settlement cycle and 
discipline and to provide a set of common requirements for CSDs operating securities 
settlement systems. The directly applicable rules of a Regulation should ensure that all 
market operators and CSDs are subject to identical directly applicable obligations and 
rules.  A  Regulation  should  increase  the  safety  and  efficiency  of  settlement  in  the 
Union by preventing any diverging national rules as a result of the transposition of a 
directive. A Regulation should reduce the regulatory complexity for market operators 
and  CSDs  resulting  from  different  national  rules  and  should  allow  CSDs  to  provide 
their services on a cross-border basis without having to comply with different sets of 
national  requirements  such  as  those  concerning  the  authorisation,  supervision, 
organisation or risks of CSDs. A Regulation imposing identical requirements on CSDs 
should also contribute to eliminating competitive distortions. 

8 

OJ L 166, 11.6.1998, p. 45. 

EN 

13 

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(6) 

(7) 

(8) 

The Financial Stability Board (FSB) called, on 20 October 20109, 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). 

The  Council,  in  its  conclusions  of  2  December  200810,  emphasised  the  need  to 
strengthen  the  safety  and  soundness  of  the  securities  settlement  systems,  and  to 
address legal barriers to post-trading in the Union. 

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. 

(9)  Member  States'  central  banks  or  any  other  bodies  performing  similar  functions  in 
certain  Member  States,  such  as  the  Member  States  national  bodies  charged  with  or 
intervening in the management of the public debt may themselves provide a number of 
services which would qualify them as a CSD. Such institutions should be exempt from 
the  authorisation  and  supervision  requirements,  but  should  remain  subject  to  the  full 
set of prudential requirements for CSDs. Since central banks act as settlement agents 
for  the  purpose  of  settlement,  they  should  also  be  exempt  from  the  requirements  set 
out in Title IV of this Regulation. 

(10)  This  Regulation  should  apply  to  the  settlement  of  transactions  in  all  financial 
instruments and activities of CSDs unless specified otherwise. This Regulation should 
also  be  without  prejudice  to  other  legislation  of  the  Union  concerning  specific 
financial instruments such as Directive 2003/87/EC of the European Parliament and of 
the  Council  of  13  October  2003  establishing  a  scheme  for  greenhouse  gas  emission 
allowance trading within the Community and amending Council Directive 96/61/EC11 
and measures adopted in accordance with that Directive. 

9 

10 
11 

FSB  "Reducing  the  moral  hazard  posed  by  systemically  important  financial  institutions",  20  October 
2010. 
Conclusions of 2911th Council meeting, ECOFIN, 2 December 2008. 
OJ L 275, 25.10.2003, p. 32. 

EN 

14 

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(11)  The  recording  of  securities  in  book-entry  form  is  an  important  step  to  increase  the 
efficiency  of  settlement  and  ensure  the  integrity  of  a  securities  issue,  especially  in  a 
context  of  increasing  complexity  of  holding  and  transfer  methods.  For  reasons  of 
safety, this Regulation provides for the recording in book-entry form of all transferable 
securities.  This  Regulation  should  not  impose  one  particular  method  for  the  initial 
book-entry recording, which may take the form of immobilisation through the issuance 
of a global note or of immediate dematerialisation. This Regulation should not impose 
the type of institution that should record securities in book-entry form upon issuance 
and  permits  different  actors,  including  registrars,  to  perform  this  function.  However, 
once such securities are traded on trading venues regulated by Directive 2004/39/EC 
of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on  markets  in 
financial  instruments  amending  Council  Directives  85/611/EEC  and 93/6/EEC  and 
Directive 2000/12/EC  of  the  European  Parliament  and  of  the  Council  and  repealing 
Council  Directive  93/22/EEC12  or  provided  as  collateral  under  the  conditions  of 
Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 
on  financial  collateral  arrangements13,  such  securities  should  be  recorded  in  a  CSD 
book-entry system in order to ensure, inter alia, that all such securities can be settled in 
a securities settlement system. 

(12) 

In  order  to  ensure  the  safety  of  settlement,  any  participant  to  a  securities  settlement 
system buying or selling certain financial instruments, namely transferable securities, 
money-market  instruments,  units  in  collective  investment  undertakings  and  emission 
allowances, should settle its obligation on the intended settlement date. 

(13)  Longer  settlement  periods  of  transactions  in  transferable  securities  cause  uncertainty 
and increased risk for securities settlement systems participants. Different durations of 
settlement  periods  across  Member  States  hamper  reconciliation  and  are  sources  of 
errors  for  issuers,  investors  and  intermediaries.  It  is  therefore  necessary  to  provide  a 
common  settlement  period  which  would  facilitate  the  identification  of  the  intended 
settlement  date  and  facilitate  the  implementation  of  settlement  discipline  measures. 
The  intended  settlement  date  of  transactions  in  transferable  securities  which  are 
admitted to trading on trading venues regulated by Directive 2004/39/EC should be no 
later than on the second business day after the trading takes place. 

(14)  CSDs  and  other  market  infrastructures  should  take  measures  to  prevent  and  address 
settlement fails. It is essential that such rules be uniformly and directly applied in the 
Union. In particular, CSDs and other market infrastructures should be required to put 
in  place  procedures  enabling  them  to  take  appropriate  measures  to  suspend  any 
participant that systematically causes settlement fails and to disclose its identity to the 
public, provided that that participant has the opportunity to submit observations before 
such a decision is taken. 

(15)  One  of  the  most  efficient  ways  to  address  settlement  fails  is  to  require  failing 
participants  to  be  subject  to  a  buy-in,  whereby  the  securities  which  ought  to  be 
delivered must be bought in the market after the intended settlement date and delivered 
to  the  receiving  participant.  This  Regulation  should  provide  for  uniform  rules 

12 
13 

OJ L 145, 30.4.2004, p. 1. 
OJ L 168, 27.6.2002, p. 43. 

EN 

15 

   EN 

 
                                                 
concerning  certain  aspects  of  the  buy-in  transaction  for  all  transferable  securities, 
money-market  instruments,  units  in  collective  investment  undertakings  and  emission 
allowances, such as the timing, notice period, pricing and penalties. 

(16)  As the main purpose of this Regulation is to introduce a number of legal obligations 
imposed directly on market operators consisting, inter alia, in the recording in book-
entry  form  in  a  CSD  of  all  transferable  securities  once  such  securities  are  traded  on 
trading venues regulated by Directive 2004/39/EC or provided as collateral under the 
conditions of Directive 2002/47/EC and in the settling their obligations no later than 
on the second business day after trading takes place and as CSDs are responsible for 
the  operation  of  securities  settlement  systems  and  the  application  of  measures  to 
provide timely settlement in the Union, it is essential to ensure that all CSDs are safe 
and sound and comply at all times with stringent organisational, conduct of business 
and  prudential  requirements  established  by  this  Regulation.  Uniform  and  directly 
applicable  rules  regarding  the  authorisation  and  ongoing  supervision  of  CSDs  are 
therefore  an  essential  corollary  of  and  are  interrelated  with  the  legal  obligations 
imposed  on  market  participants  by  this  Regulation.  It  is,  therefore,  necessary  to 
include the rules regarding the authorisation and supervision of CSDs in the same act 
as the legal obligations imposed on market participants.  

(17)  Taking into account that CSDs should be subject to a set of common requirements and 
in  order  to  dismantle  the  existing  barriers  to  cross-border  settlement,  any  authorised 
CSD should enjoy the freedom to provide its services within the territory of the Union 
either by establishment of a branch or by way of direct provision of services.  

(18)  Within a borderless Union settlement market, it is necessary to define the competences 
of  the  different  authorities  involved  in  the  application  of  this  Regulation.  Member 
States  should  specifically  designate  the  competent  authorities  responsible  for  the 
application  of  this  Regulation,  which  should  be  afforded  the  supervisory  and 
investigatory  powers  necessary  for  the  exercise  of  their  functions.  A  CSD  should  be 
subject to the authorisation and supervision of the competent authority of its place of 
establishment, which is well placed and should be empowered to examine how CSDs 
operate  on  a  daily  basis,  to  carry  out  regular  reviews  and  to  take  appropriate  action 
when  necessary.  That  authority  should  however  consult  at  the  earliest  stage  and 
cooperate with other relevant authorities, which include the authorities responsible for 
the  oversight  of  each  securities  settlement  system  operated  by  the  CSD  and,  where 
applicable,  the  relevant  central  banks  that  act  as  settlement  agent  for  each  securities 
settlement  system,  and,  also,  where  applicable,  the  competent  authorities  of  other 
group entities. This cooperation also implies immediate information of the authorities 
involved  in  case  of  emergency  situations  affecting  the  liquidity  and  stability  of  the 
financial  system  in  any  of  the  Member  States  where  the  CSD  or  its  participants  are 
established.  Whenever  a  CSD  provides  its  services  in  another  Member  State  than 
where  it  is  established  either  by  the  establishment  of  a  branch  or  by  way  of  direct 
provision  of  services  the  competent  authority  of  its  place  of  establishment  is  mainly 
responsible for the supervision of that CSD. 

(19)  Any legal person falling within the definition of a CSD needs to be authorised by the 
competent  national  authorities  before  starting  its  activities.  In  view  of  taking  into 
account  different  business  models,  a  CSD  should  be  defined  by  reference  to  certain 
core  services,  which  consist  of  settlement,  implying  the  operation  of  a  securities 
settlement system, notary and central securities accounts maintenance services. A CSD 

EN 

16 

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should  at  least  operate  a  securities  settlement  system  and  provide  one  other  core 
service.  This  definition  should  exclude,  therefore,  entities  which  do  not  operate 
securities  settlement  systems  such  as  registrars  or  public  authorities  and  bodies  in 
charge of a registry system established under Directive 2003/87/EC. This combination 
is essential for CSDs to play their role in the securities settlement and in ensuring the 
integrity of a securities issue. 

(20) 

In order to avoid any risk taking by the CSDs in other activities than those subject to 
authorisation  under  this  Regulation,  the  activities  of  the  authorised  CSDs  should  be 
limited to the provision of services covered by their authorisation and they should not 
hold any participation, as defined in the Regulation by reference to the Fourth Council 
Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the 
annual accounts of certain types of companies14, or any ownership, direct or indirect, 
of 20 % or more of the voting rights or capital in any other institutions than the ones 
providing similar services. 

(21) 

In order to ensure the safety in the functioning of the securities settlement systems, the 
latter  should  be  operated  only  by  the  CSDs  subject  to  the  rules  provided  in  this 
Regulation or by central banks. 

(22)  Without  prejudice  to  specific  requirements  of  Member  States  tax  legislation,  CSDs 
should be authorised to provide services ancillary to their core services that contribute 
to enhancing the safety, efficiency and transparency of the securities markets. Where 
the provision of such services relates to withholding tax procedures, it will continue to 
be carried out in accordance with the legislation of the Member States concerned.  

(23)  A CSD intending to outsource a core service to a third party or to provide a new core 
or  ancillary  service,  to  operate  another  securities  settlement  system,  to  use  another 
central bank as settlement agent or to set up a CSD link should apply for authorisation 
following  the  same  procedure  as  that  required  for  initial  authorisation,  with  the 
exception that the competent authority should inform the applicant CSD within three 
months whether authorisation has been granted or refused. 

(24)  CSDs established in third countries may offer their services either through a branch or 
by  way  of  direct  provision  of  services  to  issuers  and  participants  established  in  the 
Union in relation to their activities there and may set up links with CSDs established 
in the Union subject to recognition by ESMA. In view of the global nature of financial 
markets, ESMA is best placed to recognise third country CSDs. ESMA may recognise 
third country CSDs only if the Commission concludes that they are subject to a legal 
and supervisory framework equivalent to the one provided in this Regulation, if they 
are  effectively  authorised  and  supervised  in  their  country  and  if  cooperation 
arrangements have been established between ESMA and the competent authorities of 
CSDs. Recognition by ESMA is subject to an effective equivalent recognition of the 
prudential  framework  applicable  to  CSDs  established  in  the  Union  and  authorised 
under this Regulation. 

14 

OJ L 222 , 14.8.1978, p. 11. 

EN 

17 

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(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. 

(26)  Considering  the  complexity  as  well  as  the  systemic  nature  of  the  CSDs  and  of  the 
services  they  provide,  transparent  governance  rules  should  ensure  that  senior 
management, board members, shareholders and participants, who are in a position to 
exercise control as defined by reference to the Seventh Council Directive 83/349/EEC 
of  13  June  1983  based  on  Article  54(3)(g)  of  the  Treaty  on  consolidated  accounts15, 
over  the  operation  of  the  CSD,  are  suitable  to  ensure  the  sound  and  prudent 
management of the CSD. 

(27)  Transparent governance rules should ensure that the interests of the shareholders, the 
management and staff of the CSD, on the one hand, and the interests of their users, on 
the  other,  are  taken  into  account.  These  governance  principles  should  apply  without 
prejudice  to  the  ownership  model  adopted  by  the  CSD.  User  committees  should  be 
established  for  each  securities  settlement  system  operated  by  the  CSD  to  advise  the 
board of the CSD on the key issues that impact its members. 

(28)  Considering  the  importance  of  the  tasks  entrusted  to  CSDs,  this  Regulation  should 
provide  that  CSDs  do  not  transfer  their  responsibilities  to  third  parties  through 
outsourcing of their activities. Outsourcing of such activities should be subject to strict 
conditions that maintain the CSDs' responsibility for their activities and ensure that the 
supervision and oversight of the CSDs are not impaired. Outsourcing by a CSD of its 
activities  to  public  entities  may,  under  certain  conditions,  be  exempted  from  these 
requirements. 

(29)  Conduct  of  business  rules  should  provide  transparency  in  the  relations  between  the 
CSD  and  its  users.  In  particular,  a  CSD  should  have  publicly  disclosed,  transparent, 
objective and  non-discriminatory criteria for participation to the  securities settlement 
system, which would allow restricting access of the participants only on the basis of 
the  risks  involved.  A  quick  and  appropriate  remedy  should  be  made  available  to 
competent  authorities  to  address  any  unjustified  refusal  of  CSDs  to  provide  their 
services  to  participants.  A  CSD  should  publicly  disclose  prices  and  fees  for  its 
services. In order to provide open and non-discriminatory access to CSD services and 
in view of the significant market power that CSDs still enjoy on the territory of their 
respective Member States, a CSD may not diverge from its published pricing policy. A 
CSD  should  provide  for  recognised  communication  procedures.  These  participation 
provisions  complement  and  reinforce  the  right  of  market  participants  to  use  a 
settlement system in another Member State provided for in Directive 2004/39/EC. 

(30)  Considering the central role of securities settlement systems in the financial markets, 
CSDs should, when providing their services, ensure the timely settlement, the integrity 

15 

OJ L 193, 18.7.1983, p. 1. 

EN 

18 

   EN 

 
                                                 
of the issue, the segregation of the securities accounts maintained for each participant 
and  the  possibility  to  offer,  upon  request,  further  segregation  of  the  accounts  of  the 
participants'  clients.  CSDs  should  ensure  that  these  requirements  apply  separately  to 
each securities settlement system operated by them. 

(31) 

In order to avoid settlement risks due to the insolvency of the settlement agent, a CSD 
should  settle,  whenever  practical  and  available,  the  cash  leg  of  the  securities 
transaction through accounts opened with a central bank. If this option is not practical 
and  available,  a  CSD  should  be  able  to  settle  through  accounts  opened  with  a  credit 
institution  established  under  the  conditions  provided  in  Directive  2006/48/EC  of  the 
European Parliament and of the Council of 14 June 2006 relating to the taking up and 
pursuit  of  the  business  of  credit  institutions16  and  subject  to  a  specific  authorisation 
procedure  and  prudential  requirements  provided  in  Title  IV  of  this  Regulation.  The 
latter,  when  acting  as  settlement  agent,  should  be  able  to  provide  to  the  CSD's 
participants  the  services  set  out  in  this  Regulation,  which  are  covered  by  the 
authorisation,  and  may  otherwise  provide  other  services  not  covered  by  this 
Regulation.  

(32)  Considering  that  Directive  2006/48/EC  does  not  address  specifically  intraday  credit 
and  liquidity  risks  resulting  from  the  provision  of  banking  services  ancillary  to 
settlement, credit institutions providing such services should also be subject to specific 
enhanced  credit  and  liquidity  risk  mitigation  requirements  that  should  apply  to  each 
securities settlement system in respect of which they act as settlement agents. In order 
to  ensure  full  compliance  with  specific  measures  aimed  at  mitigating  credit  and 
liquidity risks, the competent authorities should be able to require CSDs to designate 
more than one credit institution whenever they can demonstrate, based on the available 
evidence, that the exposures of one credit institution to the concentration of credit and 
liquidity risks is not fully mitigated. 

(33)  The  requirement  that  the  settlement  of  the  cash  leg  of  the  securities  transaction  be 
carried  out  by  a  separate  legal  entity  acting  as  settlement  agent  is  an  important 
measure to increase the safety and resilience of CSDs. Such a separation between core 
services  of  CSDs  and  banking  services  ancillary  to  settlement  appears  indeed 
indispensible for eliminating any danger of transmission of the risks from the banking 
services, such as credit and liquidity risks, to the provision of core services of CSDs. 
There are no less intrusive measures available for eliminating those credit and liquidity 
risks in order to ensure the envisaged level of safety and resilience of CSDs. However, 
in  order  to  secure  the  efficiencies  resulting  from  the  provision  of  both  CSD  and 
banking services within the same group of undertakings, the requirement that banking 
services  be  carried  out  by  a  separate  credit  institution  should  not  prevent  that  credit 
institution from belonging to the same group of undertakings as the CSD. If both CSD 
and banking services are provided within the same group of undertakings, in order to 
increase the safety and efficiency of the services provided, the activities of the credit 
institution  providing  banking  services  should  be  limited  to  the  provision  of  banking 
services ancillary to settlement. Furthermore, a derogation to the obligation to separate 
banking services ancillary to settlement from core CSD services should be available in 
the  absence  of  any  danger  of  transmission  of  credit  and  liquidity  risks  from  the 

16 

OJ L 177, 30.6.2006, p. 1. 

EN 

19 

   EN 

 
                                                 
banking  services  to  the  provision  of  core  services  of  CSDs.  In  order  to  ensure  a 
consistent application of the possibility to derogate from the obligation on CSDs not to 
provide any banking type of ancillary services, the Commission should be empowered 
to  decide,  at  the  request  of  a  national  competent  authority,  whether  any  such 
derogation  is  permitted  in  view  of  the  absence  of  systemic  risk  incurred  by  the 
provision of both CSD core and banking services by the same legal entity. In any case, 
the activitities of a CSD benefiting from any such derogation and authorised as a credit 
institution should be limited exclusively to the provision of banking services ancillary 
to settlement. 

(34) 

In order to provide a sufficient degree of safety and continuity of the services provided 
by  the  CSDs,  the  CSD  should  be  subject  to  specific  uniform  and  directly  applicable 
prudential  and  capital  requirements  which  do  mitigate  their  legal,  operational  and 
investment risks. 

(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. 

(36)  As operators of securities settlement systems, CSDs perform a key role in the process 
of  transferring  securities  on  securities  accounts.  In  order  to  enhance  legal  certainty 
especially in a cross-border context, it is important to establish clear rules on the law 
applicable  to  ownership  aspects  in  relation  to  the  securities  that  are  maintained  by  a 
CSD  in  its  accounts.  Following  the  approach  taken  by  the  existing  conflict  of  laws 
rules, the applicable law should be the law of the place where the accounts of a CSD 
are maintained. 

(37) 

In many Member States issuers are required by national law to issue certain types of 
securities, notably shares, within their national CSDs. In order to remove this barrier to 
the smooth functioning of the Union post-trading market and to allow issuers to opt for 
the most efficient way for managing their securities, issuers should have the right to 
choose any CSD established in the Union for recording their securities and receiving 
any relevant CSD services. A quick and appropriate remedy should be made available 
to  competent  authorities  to  address  any  unjustified  refusal  of  CSDs  to  provide  their 
services to issuers. In order to protect the rights of shareholders, the right of issuers to 
choose a CSD should not prevent the application of the national corporate laws under 
which the securities are constituted and which govern the relation between issuers and 
their shareholders. 

EN 

20 

   EN 

 
(38)  The  European  Code  of  Conduct  for  Clearing  and  Settlement  of  7  November  200617 
created  a  voluntary  framework  to  enable  access  between  CSDs  and  other  market 
infrastructures.  However,  the  post-trade  sector  remains  fragmented  along  national 
lines,  making  cross-border  trades  more  costly.  It  is  necessary  to  lay  down  uniform 
conditions  for  links  between  CSDs  and  of  access  between  CSDs  and  other  market 
infrastructures.  In  order  to  enable  CSDs  to  offer  their  participants  access  to  other 
markets, they should have a right to become a participant of another CSD or request 
another CSD to develop special functions for having access to the latter. A quick and 
appropriate remedy should be made available to competent authorities to address any 
unjustified  refusal  of  a  CSD  to  grant  access  to  another  CSD.  Since  CSD  links  may 
introduce  additional  risk  for  settlement,  they  should  be  subject  to  authorisation  and 
supervision by the relevant competent authorities. 

(39)  CSDs should also have access to transaction feeds from a CCP or a trading venue and 
those  market  infrastructures  should  have  access  to  the  securities  settlement  systems 
operated by the CSDs, unless such access endangers the operation of their activities. A 
quick  and  appropriate  remedy  should  be  made  available  to  competent  authorities  to 
address any unjustified refusal of CSDs or market infrastructures to provide access to 
their services. 

(40)  A sound prudential and conduct of business framework for the finanical sector should 
rest  on  strong  supervisory  and  sanctioning  regimes.  To  this  end,  supervisory 
authorities should be equipped with sufficient powers to act and should be able to rely 
on deterrent sanctioning regimes to be used against any unlawful conduct. A review of 
existing  sanctioning  powers  and  their  practical  application  aimed  at  promoting 
convergence  of  sanctions  across  the  range  of  supervisory  activities  has  been  carried 
out in the Communication of 8 December 2010 from the Commission to the European 
Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions on reinforcing sanctioning in the financial services sector. 

(41)  Therefore,  in  order  to  ensure  effective  compliance  by  CSDs,  credit  institutions 
designated  as  settlement  agents,  the  members  of  their  management  bodies  and  any 
other  persons  who  effectively  control  their  business  or  any  other  persons  with  the 
requirements  of  this  Regulation,  competent  authorities  should  be  able  to  apply 
administrative  sanctions  and  measures  which  are  effective,  proportionate  and 
dissuasive. 

(42) 

In  order  to  provide  deterrence  and  consistent  application  of  the  sanctions  across 
Member  States,  this  Regulation  should  provide  for  a  list  of  key  administrative 
sanctions and measures that need to be available to the competent authorities, for the 
power to impose those sanctions and measures on all persons, whether legal or natural, 
responsible for a breach, for a a list of key criteria when determining the level and type 
of those sanctions and measures and for levels of administrative pecuniary sanctions. 
Administrative fines should take into account factors such as any identified financial 
benefit  resulting  from  the  breach,  the  gravity  and  duration  of  the  breach,  any 

17 

"European  Code  of  Conduct  for  Clearing  and  Settlement"  signed  by  FESE  (Federation  of  European 
Securities  Exchanges),  EACH  (European  Association  of  Clearing  Houses)  and  ECSDA  (European 
Central Securities Depositories Association) on 7 November 2006. 

EN 

21 

   EN 

 
                                                 
aggravating  or  mitigating  factors,  the  need  for  fines  to  have  a  deterrent  effect  and, 
where  appropriate,  include  a  discount  for  cooperation  with  the  competent  authority. 
The  adoption  and  publication  of  sanctions  should  respect  fundamental  rights  as  laid 
down in the Charter of Fundamental Rights of the European Union, in particular the 
rights  to  respect  for  private  and  family  life  (Article  7),  the  right  to  the  protection  of 
personal data (Article 8) and the right to an effective remedy and to a fair trial (Article 
47). 

(43) 

In order to detect potential breaches, effective mechanisms to encourage reporting of 
potential or actual breaches of this Regulation to the competent authorities should be 
put  in  place.  These  mechanisms  should  include  adequate  safeguards  for  the  persons 
who report potential or actual breaches of this Regulation and the persons accused of 
such  breaches.  Appropriate  procedures  should  be  established  to  comply  with  the 
accused person's right to protection of personal data, with the right of defence and to 
be heard before the adoption of a final decision affecting that person as well as with 
the  right  to  seek  effective  remedy  before  a  tribunal  against  any  decision  or  measure 
affecting that person.  

(44)  This Regulation should be without prejudice to any provisions in the law of Member 

States relating to criminal sanctions. 

(45)  Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 
on the protection of individuals with regard to the processing of personal data and on 
the free movement of such data18
 governs the processing of personal data carried out in 
the  Member  States  pursuant  to  this  Regulation.  Any  exchange  or  transmission  of 
personal data by competent authorities of the Member States should be undertaken in 
accordance  with  the  rules  on  the  transfer  of  personal  data  as  laid  down  in  Directive 
95/46/EC. Regulation (EC) No 45/2001 of the European Parliament and of the Council 
of 18 December 2000 on the protection of individuals with regard to the processing of 
personal data by the Community institutions and bodies and on the free movement of 
such data19 governs the processing of personal data carried out by ESMA pursuant to 
this Regulation. Any exchange or transmission of personal data carried out by ESMA 
should be in accordance with the rules on the transfer of personal data as laid down in 
Regulation (EC) No 45/2001. 

(46)  This  Regulation  complies  with  the  fundamental  rights  and  observes  the  principles 
recognised in particular by the Charter of Fundamental Rights of the European Union, 
notably the rights to respect for private and family life, the right to the protection of 
personal data, the right to an effective remedy or to a fair trial, the right not to be tried 
or punished twice for the same offence, the freedom to conduct a business, and has to 
be applied in accordance with those rights and principles. 

(47)  European Securities and Markets Authority (ESMA), established by Regulation (EU) 
No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing  a  European  Supervisory  Authority  (ESMA),  amending  Decision  No 

18 
19 

OJ L 281, 23.11.1995, p.31. 
OJ L 8, 12.1.2001, p. 1. 

EN 

22 

   EN 

 
                                                 
716/2009/EC and repealing Commission Decision 2009/77/EC20, should play a central 
role in the application of this Regulation by ensuring consistent application of Union 
rules by national competent authorities and by settling disagreements between them.  

(48)  As  a  body  with  highly  specialised  expertise  regarding  securities  and  securities 
markets, it is efficient and appropriate to entrust ESMA with the elaboration of draft 
regulatory and implementing technical standards which do not involve policy choices, 
for  submission  to  the  Commission.  Whenever  specified,  ESMA  should  also  involve 
closely  the  members  of  the  ESCB  and  the  European  Banking  Authority  (EBA), 
established  by  Regulation  (EU)  No  1093/2010  of  the  European  Parliament  and  the 
Council  of  24  November  2010  establishing  a  European  Supervisory  Authority 
(European  Banking  Authority),  amending  Decision  No  716/2009/EC  and  repealing 
Commission Decision 2009/78/EC21. 

(49)  The  Commission  should  be  empowered  to  adopt  regulatory  technical  standards  in 
accordance with Article 290 of the Treaty on the Functioning of the European Union 
and with the procedure set out in Articles 10 to 14 of Regulation (EU) No 1095/2010 
with  regard  to  the  detailed  elements  of  the  settlement  discipline  measures;  the 
information  and  other  elements  to  be  included  by  a  CSD  in  its  application  for 
authorisation;  the  information  that  different  authorities  shall  supply  each  other  when 
supervising the CSDs; the details of the cooperation arrangements between home and 
host authorities; the elements of the governance arrangements for CSDs; the details of 
the records to be kept by CSDs; the details of the  measures  to be taken  by  CSDs so 
that  the  integrity  of  the  issue  is  maintained;  the  protection  of  the  participants' 
securities; the timely achievement of settlement; the mitigation of the operational risks 
and of the risks derived from the CSD links; the details of the capital requirements for 
CSDs;  the  details  of  the  prudential  requirements  on  credit  and  liquidity  risks  for  the 
designated credit institutions.  

(50)  The  Commission  should  also  be  empowered  to  adopt  implementing  technical 
standards  by  means  of  implementing  acts  pursuant  to  Article  291  of  Treaty  on  the 
Functioning  of  the  European  Union  and  in  accordance  with  the  procedure  set  out  in 
Article  15  of  Regulation  (EU)  No  1095/2010  with  regard  to  standard  forms  and 
templates  for  the  application  for  authorisation  by  CSDs;  for  the  provision  of 
information between different competent authorities for the purposes of supervision of 
CSDs; for the relevant cooperation arrangements between home and host authorities; 
for  formats  of  records  to  be  kept  by  CSDs;  for  the  procedures  in  cases  when  a 
participant  or  an  issuer  is  denied  access  to  a  CSD,  CSDs  are  denied  access  between 
themselves or between CSDs and other market infrastructures; for the consultation of 
different authorities prior to granting authorisation to a settlement agent. 

(51)  The  Commission  should  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 290 of the Treaty. In particular, the delegated acts should be adopted in respect 
of specific details concerning definitions; the criteria under which the operations of a 
CSD in a host Member State should be considered of substantial importance for that 
Member State; the services for which a third country CSD shall seek for recognition 

20 
21 

OJ L 331, 15.12.2010, p. 84. 
OJ L 331, 15.12.2010, p. 12. 

EN 

23 

   EN 

 
                                                 
by  ESMA  and  the  information  that  the  applicant  CSD  shall  provide  ESMA  in  its 
application for recognition; the risks which may justify a refusal by a CSD of access to 
participants and the elements of the procedure available for requesting participants; the 
assessment  of  situations  when  settlement  in  central  bank  money  is  not  practical  and 
available; the elements of the procedure for access of issuers to CSDs, access between 
CSDs and between CSDs and other market infrastructures.  

(52) 

In  order  to  ensure  uniform  conditions  for  the  implementation  of  this  Regulation, 
implementing powers should be conferred on the Commission to take decisions on the 
assessment  of  rules  from  third  countries  for  the  purposes  of  recognition  of  third 
country  CSDs  and  derogations  from  the  obligation  to  separate  banking  services 
ancillary to settlement from core CSD services. Those powers should be exercised in 
accordance with Regulation (EU) No 182/2011 of the European Parliament and of the 
Council of 16 February 2011 laying down the rules and general principles concerning 
mechanisms  for  control  by  the  Member  States  of  the  Commission's  exercise  of 
implementing powers22. 

(53)  Since the objectives of this Regulation, namely to lay down uniform requirements for 
settlement as well as for CSDs, cannot be sufficiently achieved by the Member States 
and  can  therefore,  by  reason  of  the  scale  of  the  action,  be  better  achieved  at  Union 
level, the Union may adopt measures, in accordance with the principle of subsidiarity 
as  set  out  in  Article  5  of  the  Treaty  on  European  Union.  In  accordance  with  the 
principle  of  proportionality,  as  set  out  in  that  Article,  this  Regulation  does  not  go 
beyond what is necessary in order to achieve those objectives. 

(54) 

It  is  necessary  to  amend  Directive  98/26/EC  to  bring  it  in  line  with  the  Directive 
2010/78/EU  of  the  European  Parliament  and  of  the  Council  of  24  November  2010 
amending  Directives  98/26/EC,  2002/87/EC,  2003/6/EC,  2003/41/EC,  2003/71/EC, 
2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in 
respect  of  the  powers  of  the  European  Supervisory  Authority  (European  Banking 
Insurance  and 
Authority), 
Occupational Pensions Authority) and the European Supervisory Authority (European 
Securities and Markets Authority)23, whereby designated securities settlement systems 
are no longer notified to the Commission but to ESMA. 

the  European  Supervisory  Authority 

(European 

(55)  The  application  of  the  authorisation  and  recognition  requirements  of  this  Regulation 
should  be  deferred  in  order  to  provide  CSDs  established  in  the  Union  or  in  third 
countries with sufficient time to seek authorisation and recognition provided for in this 
Regulation.  

(56) 

It  is  also  necessary  to  defer  the  application  of  the  requirements  of  recording  certain 
transferable  securities  in  book-entry  form  and  settling  obligations  in  securities 
settlement systems no later than on the second business day after the trading in order 
to  provide  market  participants,  holding  securities  in  paper  form  or  using  longer 
settlement periods, with sufficient time to comply with those requirements. 

22 
23 

OJ L 55, 28.2.2011, p. 13. 
OJ L 331, 15.12.2010, p. 120. 

EN 

24 

   EN 

 
                                                 
HAVE ADOPTED THIS REGULATION: 

EN 

25 

   EN 

 
Title I 
Subject matter, scope and definitions 

Article 1 
Subject matter and scope 

1. 

2. 

3. 

4. 

This  Regulation  lays  down  uniform  requirements  for  the  settlement  of  financial 
instruments  in  the  Union  and  rules  on  the  organisation  and  conduct  of  central 
securities depositories to promote safe and smooth settlement.  

This Regulation applies to the settlement of all financial instruments and activities of 
CSDs unless otherwise specified in the provisions of this Regulation. 

This  Regulation  is  without  prejudice  to  provisions  of  Union  legislation  concerning 
specific financial instruments, in particular Directive 2003/87/EC. 

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. 

1. 

For the purposes of this Regulation, the following definitions apply: 

Article 2 
Definitions 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

‘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;  

'settlement'  means  the  completion  of  a  securities  transaction  with  the  aim  of 
discharging  the  obligations  of  participants  through  the  transfer  of  funds  or 
securities; 

'securities settlement system' means a system under the first and second indents 
of point (a) of Article 2 of Directive 98/26/EC whose business consists of the 
execution  of  transfer  orders  as  defined  in  the  second  indent  of  point  (i)  of 
Article 2 of Directive 98/26/EC;  

'settlement  period'  means  the  time  period  between  the  trade  date  and  the 
intended settlement date; 

'business  day'  means  business  day  as  defined  in  point  (n)  of  Article  2  of 
Directive 98/26/EC; 

'settlement  fail'  means  the  non-occurrence  of  settlement  of  a  securities 
transaction on the intended settlement date due to a lack of securities or cash, 
regardless of the underlying cause; 

EN 

26 

   EN 

 
(7) 

(8) 

'intended  settlement  date'  means  the  date  on  which  the  parties  to  a  securities 
transaction agree that settlement is to take place; 

'central counterparty (CCP)' means an entity that interposes itself between the 
counterparties  to  the  contracts  traded  within  one  or  more  financial  markets, 
becoming the buyer to every seller and the seller to every buyer;  

(9) 

'competent authority' means the authority designated by each Member State in 
accordance with Article 10; 

(10)  'participant'  means  any  participant,  as  defined  in  point  (f)  of  Article  2  of 
Directive 98/26/EC, including a CCP, to a securities settlement system;  

(11)  ‘participation’ means participation within the meaning of the first sentence of 
Article 17 of Directive 78/660/EEC, or the ownership, direct or indirect, of 20 
% or more of the voting rights or capital of an undertaking; 

(12)  ‘home  Member  State’  means  the  Member  State  in  which  a  CSD  has  been 

authorised;  

(13)  ‘host  Member  State’  means  the  Member  State,  other  than  the  home  Member 

State, in which a CSD has a branch or provides CSD services;  

(14)  ‘branch’ means a place of business other than the head office which is a part of 
a  CSD,  which  has  no  legal  personality  and  which  provides  CSD  services  for 
which the CSD has been authorised;  

(15)  ‘control’  means  the  relationship  between  two  undertakings  as  defined  in 

Article 1 of Directive 83/349/EEC; 

(16)  'participant's  default'  means  a  situation  where  insolvency  proceedings,  as 
defined  in  point  (j)  of  Article  2  of  Directive  98/26/EC,  are  opened  against  a 
participant; 

(17)  'delivery  versus  payment'  ('DVP')  means  a  securities  settlement  mechanism 
which  links  a  transfer  of  securities  with  a  transfer  of  funds  in  a  way  that  the 
delivery of securities occurs only if the corresponding payment occurs; 

(18)  'securities  account'  means  an  account  on  which  securities  may  be  credited  or 

debited; 

(19)  'CSD link' means an arrangement between CSDs whereby one CSD opens an 
account in the securities settlement system of another CSD in order to facilitate 
the  transfer  of  securities  from  its  participants  to  the  participants  of  that  CSD. 
CSD  links  include  standard  link  access,  customised  link  access  and 
interoperable links; 

(20)  'standard  link  access'  means  a  CSD  link  whereby  a  CSD  is  connected  to 
another  CSD  as  any  other  participant  to  the  securities  settlement  system 
operated by the latter; 

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(21)  'customised  link  access'  means  a  CSD  link  whereby  a  CSD  provides  specific 
services  to  another  CSD  distinct  from  the  services  provided  to  other 
participants to its securities settlement system; 

(22)  'interoperability  links'  means  CSD  links  whereby  the  securities  settlement 
systems  operated  by  CSDs  become  interoperable  as  defined  in  point  (o)  of 
Article 2 of Directive 98/26/EC; 

(23)  'transferable securities' means transferable securities as defined in point (18) of 

Article 4 of Directive 2004/39/EC; 

(24)  'money-market  instruments'  means  money-market  instruments  as  defined  in 

point (19) of Article 4 of Directive 2004/39/EC; 

(25)  'units  in  collective  investment  undertakings'  means  units  in  collective 
investment undertakings as referred to in point (3) of Section C of Annex I of 
Directive 2004/39/EC; 

(26)  'emission  allowances'  means  any  units  recognised  for  compliance  with  the 

requirements of Directive 2003/87/EC; 

(27)  'regulated market' means 'regulated market' as defined in point (14) of Article 4 

of Directive 2004/39/EC; 

(28)  'multilateral  trading  facility  (MTF)'  means  multilateral  trading  facility  as 

defined in point (15) of Article 4 of Directive 2004/39/EC; 

(29)  'organised trading facility (OTF)' means any system or facility, which is not a 
regulated market or MTF, operated by an investment firm or a market operator, 
in  which  multiple  third-party  buying  and  selling  interests  in  financial 
instruments are able to interact in the system in a way that results in a contract 
in accordance with the provisions of Title II of Directive 2004/39/EC; 

(30)  'subsidiary' means a subsidiary undertaking within the meaning of Article 1 of 

Directive 83/349/EEC; 

(31)  'settlement agent' means settlement agent as defined in point (d) of Article 2 of 

Directive 98/26/EC. 

2. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 64 concerning measures to specify the technical elements of the definitions in 
points (17), (20), (21) and (22) of paragraph 1, and to specify the ancillary services 
set out in points (1) to (4) of Section B of the Annex and the services set out in points 
(1) and (2) of Section C of the Annex. 

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Title II 
Securities settlement  

Chapter I 
Book-entry form 

Article 3 
Book-entry form 

1. 

2. 

1. 

2. 

3. 

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. 

Where  the  securities  referred  to  in  paragraph  1  are  traded  on  regulated  markets, 
traded on multilateral trading facilities (MTFs) or organised trading facilities (OTFs) 
or are transferred following a financial collateral arrangement as defined in point (a) 
of Article 2 of Directive 2002/47/EC, those securities shall be recorded in book-entry 
form in a CSD prior to the trade date, unless they have already been so recorded. 

Article 4 
Enforcement 

The  authorities  of  the  Member  State  where  the  company  that  issues  securities  is 
established shall be competent for ensuring that Article 3(1) is applied. 

The  authorities  competent  for  the  supervision  of  the  regulated  markets,  MTFs  and 
OTFs  shall  ensure  that  Article  3(2)  is  applied  when  the  securities  referred  to  in 
Article 3(1) are traded on regulated markets, MTFs or OTFs. 

Member  States'  authorities  responsible  for  the  application  of  Directive  2002/47/EC 
shall be competent for ensuring that Article 3(2) of this Regulation is applied when 
the securities referred to in Article 3(1) of this Regulation are transferred following a 
financial  collateral  arrangement  as  defined  in  point  (a)  of  Article  2  of  Directive 
2002/47/EC.  

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Chapter II 
Settlement periods 

Article 5 
Intended settlement dates 

1. 

2. 

3. 

1. 

2. 

3. 

4. 

Any participant to a securities settlement system buying or selling on its own account 
or on behalf of a third party transferable securities, money-market instruments, units 
in  collective  investment  undertakings  and  emission  allowances  shall  settle  its 
obligation  in  relation  to  the  securities  settlement  system  on  the  intended  settlement 
date. 

As  regards  transferable  securities  referred  to  in  paragraph  1  which  are  traded  on 
regulated markets, MTFs or OTFs, the intended settlement date shall be no later than 
on the second business day after the trading takes place.  

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 paragraphs 
1 and 2 are applied. 

Chapter III 
Settlement discipline 

Article 6  
Measures to prevent settlement fails 

Any  regulated  market,  MTF  or  OTF  shall  establish  procedures  that  enable  the 
confirmation of relevant details of transactions in financial instruments referred to in 
Article 5 (1) on the date when the orders have been sent to it.  

For  each  securities  settlement  system  it  operates,  a  CSD  shall  establish  procedures 
that  facilitate  the  settlements  of  transactions  in  financial  instruments  referred  to  in 
Article 5(1) on the intended settlement date. It shall promote early settlement on the 
intended  settlement  date  through  appropriate  mechanisms,  such  as  a  progressive 
tariff structure. 

For  each  securities  settlement  system  it  operates,  a  CSD  shall  establish  monitoring 
tools  that  allow  it  to  identify  in  advance  settlements  of  transactions  in  financial 
instruments referred to in Article 5(1) that are most likely to fail and it shall require 
participants to settle such transactions on the intended settlement date. 

(ESMA)  shall  develop  in 
The  European  Securities  and  Markets  Authority 
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.  

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ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010.  

Article 7 
Measures to address settlement fails 

1. 

2. 

3. 

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.  

For  each  securities  settlement  system  it  operates,  a  CSD  shall  establish  procedures 
that facilitate settlement of transactions in financial instruments referred to in Article 
5(1)  that  are  not  settled  on  the  intended  settlement  date.  These  procedures  shall 
provide for a sufficiently deterrent penalty mechanism for participants that cause the 
settlement fails.  

A  participant  to  a  securities  settlement  system  that  fails  to  deliver  the  financial 
instruments  referred  to  in  Article  5(1)  to  the  receiving  participant  on  the  intended 
settlement  date  shall  be  subject  to  a  buy-in  whereby  those  instruments  shall  be 
bought  in  the  market  no  later  than  four  days  after  the  intended  settlement  date  and 
delivered  to  that  receiving  participant  and  other  measures  in  accordance  with 
paragraph 4.  

4. 

The measures referred to in paragraph 3 shall specify at least the following: 

(a) 

(b) 

the  daily  penalty  paid  by  the  defaulting  participant  for  each  business  day 
between the intended settlement date and the actual settlement date;  

the notice period given to the defaulting participant before the execution of a 
buy-in; 

(c) 

the pricing and costs of a buy-in;  

(d)  where relevant, the party that executes the buy-in; 

(e) 

the amount of compensation for the receiving participant in case the execution 
of the buy-in is not possible. 

5. 

The measures referred to in paragraph 3 shall ensure that: 

(a) 

the receiving participant receives at least the price of the financial instruments 
agreed at the time of the trade; 

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(b) 

the daily penalty paid by the defaulting participant is sufficiently deterrent for 
the defaulting participant; 

(c)  where  the  execution  of  the  buy-in  is  not  possible,  the  amount  of  cash 
compensation  paid  to  the  receiving  participant  is  higher  than  the  price  of  the 
financial  instruments  agreed  at  the  time  of  the  trade  and  the  last  publicly 
available price for such instruments on the trading venue where the trade took 
place, and is sufficiently deterrent for the defaulting participant; 

(d) 

(e) 

the parties referred to in paragraph 7, including CCPs, who execute the buy-in 
disclose to participants the fees charged for this service; 

if  a  party  other  than  the  failing  participant  executes  the  buy-in,  the  failing 
participant  reimburse  all  amounts  paid  by  the  executing  party  in  accordance 
with paragraphs 3 and 4.  

CSDs,  CCPs,  regulated  markets,  MTFs  and  OTFs  shall  establish  procedures  that 
enable  them  to  suspend  any  participant  that  fails  systematically  to  deliver  the 
financial  instruments  referred  to  in  paragraph  1  or  cash  on  the  intended  settlement 
date  and  to  disclose  to  the  public  its  identity  only  after  giving  that  participant  the 
opportunity to submit its observations. 

Paragraphs  2  to  6  shall  apply  to  all  transactions  of  the  instruments  referred  to  in 
Article 5 (1) which are admitted to trading on regulated markets, traded on MTFs or 
OTFs or cleared by a CCP.  

For transactions cleared by a CCP before being settled within a securities settlement 
system, the measures referred to in paragraph 3 to 5 shall be executed by the CCP.  

For transactions not cleared by a CCP, the regulated markets, MTFs and OTFs shall 
include in their internal rules an obligation on their participants to be subject to the 
measures referred to in paragraph 3 to 5. 

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical  standards  to  specify  the  details  of  the  system  monitoring  settlement  fails 
and  the  reports  on  settlement  fails  referred  to  in  paragraph  1,  of  the  procedures 
facilitating  settlement  of  transactions  following  settlement  fails  referred  to  in 
paragraph 2 and the measures referred to in paragraphs 3 to 5.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

6. 

7. 

8. 

Article 8 
Enforcement  

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 

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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. 

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Title III 
Central securities depositories 

Chapter I 
Authorisation and supervision of CSDs  

SECTION 1 
AUTHORITIES RESPONSIBLE FOR AUTHORISATION AND SUPERVISION OF CSDS 

Article 9 
Competent authority 

A  CSD  shall  be  authorised  and  supervised  by  the  competent  authority of  the  Member  State 
where it is established.  

1. 

2. 

3. 

1. 

Article 10 
Designation of the competent authority 

Each Member State shall designate the competent authority responsible for carrying 
out  the  duties  under  this  Regulation  for  the  authorisation  and  supervision  of  CSDs 
established in its territory and shall inform ESMA thereof. 

Where  a  Member  State  designates  more  than  one  competent  authority,  it  shall 
determine  their  respective  roles  and  shall  designate  a  single  authority  to  be 
responsible  for  cooperation  with  other  Member  States'  competent  authorities,  the 
relevant authorities referred to in Article 11, ESMA, and EBA whenever specifically 
referred to in this Regulation.  

ESMA shall publish on its website a list of the competent authorities designated in 
accordance with paragraph 1. 

The  competent  authorities  shall  have  the  supervisory  and  investigatory  powers 
necessary for the exercise of their functions. 

Article 11 
Relevant authorities 

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;  

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(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. 

ESMA  shall  publish  on  its  website  the  list  of  the  relevant  authorities  referred  to  in 
paragraph 1. 

Article 12 
Cooperation between authorities 

The authorities referred to in Articles 9 and 11 and ESMA shall cooperate closely for 
the application of this Regulation, in particular in emergency situations referred to in 
Article 13. Whenever appropriate and relevant, such cooperation shall include other 
public  authorities  and  bodies,  in  particular  those  established  or  appointed  under 
Directive 2003/87/EC. 

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. 

The competent authorities shall, in the exercise of their general duties, duly consider 
the potential impact of their decisions on the  stability  of  the  financial  system  in  all 
other Member States concerned, in particular in the emergency situations referred to 
in Article 13, based on the available information. 

2. 

1. 

2. 

Article 13 
Emergency situations 

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. 

SECTION 2 
CONDITIONS AND PROCEDURES FOR AUTHORISATION OF CSDS 

Article 14 
Authorisation of a CSD 

1. 

Any legal person that falls within the definition of CSD shall obtain an authorisation 
from  the  competent  authority  of  the  Member  State  where  it  is  established  before 
commencing its activities.  

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2. 

3. 

1. 

2. 

3. 

4. 

5. 

The authorisation shall specify the services set out in Sections A and B of the Annex, 
which the CSD is authorised to provide.  

A CSD shall comply at all times with the conditions necessary for the authorisation. 

A  CSD  shall,  without  undue  delay,  inform  the  competent  authority  of  any  material 
changes affecting the conditions for authorisation. 

Article 15 
Procedure for granting authorisation 

The  applicant  CSD  shall  submit  an  application  for  authorisation  to  its  competent 
authority. 

The application for authorisation shall be accompanied by all information necessary 
to  enable  the  competent  authority  to  satisfy  itself  that  the  applicant  CSD  has 
established, at the time of the authorisation, all the necessary arrangements to meet 
its  obligations  set  out  in  this  Regulation.  The  application  for  authorisation  shall 
contain  a  programme  of  operations  setting  out  the  types  of  business  envisaged  and 
the structural organisation of the CSD. 

Within 20 working days from the receipt of the application, the competent authority 
shall  assess  whether  the  application  is  complete.  If  the  application  is  not  complete, 
the  competent  authority  shall  set  a  time  limit  by  which  the  applicant  CSD  has  to 
provide  additional  information.  The  competent  authority  shall  inform  the  applicant 
CSD when the application is considered to be complete. 

As  from  the  moment  when  the  application  is  considered  to  be  complete,  the 
competent authority shall transmit all information included in the application to the 
relevant authorities referred to in Article 11 and consult those authorities concerning 
the features of the securities settlement system operated by the applicant CSD. 

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:  

(a) 

the CSD is a subsidiary of a CSD authorised in another Member State;  

(b) 

(c) 

the  CSD  is  a  subsidiary  of  the  parent  undertaking  of  a  CSD  authorised  in 
another Member State;  

the  CSD  is  controlled  by  the  same  natural  or  legal  persons  who  control  a 
different CSD authorised in another Member State. 

The consultation referred to in the first subparagraph shall cover the following: 

(a) 

the suitability of the shareholders and participants referred to in Article 25(4) 
and  the  reputation  and  experience  of  persons  who  effectively  direct  the 
business of the CSD whenever those shareholders, participants and persons are 
common to both the CSD and a CSD authorised in another Member State;  

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(b)  whether the relations referred to in paragraph 5 between the CSD authorised in 
another  Member  State  and  the  applicant  CSD  do  not  affect  the  ability  of  the 
latter to comply with the requirements of this Regulation.  

6. 

7. 

Within  six  months  from  the  submission  of  a  complete  application,  the  competent 
authority  shall  inform  the  applicant  CSD  in  writing  with  a  fully  reasoned  decision 
whether the authorisation has been granted or refused. 

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 in the application for authorisation.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010.  

8. 

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing  technical  standards  to  establish  standard  forms,  templates  and 
procedures for the application for authorisation. 

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. 

Article 16 
Effects of the authorisation 

1. 

2. 

3. 

4. 

The  activities  of  the  authorised  CSD  shall  be  limited  to  the  provision  of  services 
covered by its authorisation.  

Securities settlement systems may be operated only by authorised CSDs and central 
banks. 

An  authorised  CSD  shall  not  be  exposed  to  any  risks  related  to  the  provision  of 
banking type of ancillary services by the credit institution designated to provide such 
services in accordance with Title IV. 

An authorised CSD may only have a participation in a legal person whose activities 
are limited to the provision of services set out in Sections A and B of the Annex. 

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Article 17 
Extension and outsourcing of activities and services 

1. 

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: 

(a) 

additional  core  and  ancillary  services  set  out  in  the  Sections  A  and  B  of  the 
Annex not covered by the initial authorisation;  

(b) 

the operation of another securities settlement system; 

(c) 

the settlement of all or part the cash leg of its securities settlement system in 
the books of another central bank; 

(d) 

setting up any CSD link. 

2. 

The granting of authorisation under paragraph 1 shall follow the procedure set out in 
Article 15.  

The  competent  authority  shall  inform  the  applicant  CSD  whether  the  authorisation 
has  been  granted  or  refused  within  three  months  of  the  submission  of  a  complete 
application.  

Article 18 
Withdrawal of authorisation 

1. 

The  competent  authority  of  the  Member  State  where  the  CSD  is  established  shall 
withdraw the authorisation in any of the following circumstances:  

(a)  where  the  CSD  has  not  made  use  of  the  authorisation  during  12  months, 
expressly renounces the authorisation or has provided no services or performed 
no activity during preceding six months; 

(b)  where the CSD has obtained the authorisation by making false statements or by 

any other unlawful means; 

(c)  where  the  CSD  no  longer  complies  with  the  conditions  under  which 
authorisation was granted and has not taken the remedial actions requested by 
the competent authority within a set time frame; 

(d)  where the CSD has seriously and systematically infringed the requirements set 

out in this Regulation. 

2. 

As  from  the  moment  it  becomes  aware  of  one  of  the  circumstances  referred  to  in 
paragraph  1,  the  competent  authority  shall  immediately  consult  the  relevant 
authorities  referred  to  in  Article  11  on  the  necessity  to  withdraw  the  authorisation 
except where such a decision is required urgently. 

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3. 

4. 

1. 

2. 

3. 

4. 

1. 

2. 

3. 

4. 

ESMA and any relevant authority referred to in Article 11 may, at any time, request 
that  the  competent  authority  of  the  Member  State  where  the  CSD  is  established 
examines  whether  the  CSD  still  complies  with  the  conditions  under  which  the 
authorisation was granted.  

The competent authority may limit the withdrawal to a particular service, activity, or 
financial instrument. 

Article 19 
CSD Register 

Decisions  taken  by  competent  authorities  under  Articles  14,  17  and  18  shall  be 
immediately communicated to ESMA. 

Central banks shall immediately inform ESMA of any CSD that they operate.  

The name of each CSD operating in compliance with this Regulation and to which 
authorisation or recognition has been granted under Articles 14, 17 and 23 shall be 
entered in a list specifying the services and classes of financial instruments for which 
the CSD has been authorised. The list shall include branches operated by the CSD in 
other  Member  States  and  CSD  links.  ESMA  shall  publish  the  list  on  its  dedicated 
website and keep it up to date. 

The competent authorities referred to in Article 9 shall communicate to ESMA those 
institutions that operate as CSDs within 90 days from the date of entry into force of 
this Regulation.  

SECTION 3 
SUPERVISION OF CSDS 

Article 20 
Review and evaluation 

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.  

The  competent  authority  shall  establish  the  frequency  and  depth  of  the  review  and 
evaluation referred to in paragraph 1 having regard to the size, systemic importance, 
nature, scale and complexity of the activities of the CSD concerned. The review and 
evaluation shall be updated at least on an annual basis. 

The competent authority may subject the CSD to on-site inspections.  

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. 

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5. 

6. 

7. 

8. 

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. 

When  performing  the  review  and  evaluation  referred  to  in  paragraph  1,  the 
competent authorities responsible for supervising CSDs which maintain the types of 
relations  referred  to  in  points  (a),  (b)  and  (c)  of  the  first  subparagraph  of  Article 
15(5) shall supply one another with all relevant information that is likely to facilitate 
their tasks. 

The competent authority shall require the CSD that does not meet the requirements 
of this Regulation to take at an early stage the necessary actions or steps to address 
the situation. 

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical standards to specify the following: 

(a) 

(b) 

(c) 

the information that the CSD shall provide to the competent authority for the 
purposes of the review referred to in paragraph 1; 

the  information  that  the  competent  authority  shall  supply  to  the  relevant 
authorities referred to in paragraph 5; 

the information that the competent authorities referred to in paragraph 6 shall 
supply one another. 

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

9. 

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing  technical  standards  to  determine  standard  forms,  templates  and 
procedures  for  the  provision  of  information  referred  to  in  the  first  subparagraph  of 
paragraph 8. 

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. 

EN 

40 

   EN 

 
SECTION 4 
PROVISION OF SERVICES IN ANOTHER MEMBER STATE 

Article 21 
Freedom to provide services in another Member State  

An  authorised  CSD  may  carry  out  its  activities  within  the  territory  of  the  Union, 
either  by  the  establishment  of  a  branch  or  by  way  of  direct  provision  of  services, 
provided that the types of activities concerned are covered by the authorisation. 

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) 

(c) 

a programme of operations stating in particular the services which it intends to 
provide; 

in case of a branch, the organisational structure of the branch and the names of 
those responsible for the management of the branch. 

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. 

Where  the  competent  authority  refuses  to  communicate  the  information  to  the 
competent authority of the host Member State, it shall give reasons for its refusal to 
the CSD concerned within three months of receiving all the information. 

The  CSD  may  start  providing  its  services  in  the  host  Member  State  under  the 
following conditions: 

(a)  on  receipt  of  a  communication  from  the  competent  authority  in  the  host 
Member  State  acknowledging  receipt  by  the  latter  of  the  communication 
referred to in paragraph 3; 

(b) 

in the absence  of any receipt  of  a communication,  after  two  months  from  the 
date of transmission of the communication referred to in paragraph 3. 

In the event of a change in any of the information communicated in accordance with 
paragraph 2,  a  CSD  shall  give  written  notice  of  that  change  to  the  competent 
authority  of  the  home  Member  State  at  least  one  month  before  implementing  the 
change. The competent authority of the host Member State shall also be informed of 
that change by the competent authority of the home Member State. 

1. 

2. 

3. 

4. 

5. 

6. 

EN 

41 

   EN 

 
1. 

2. 

3. 

4. 

5. 

Article 22 
Cooperation between home and host authorities  

Where  a  CSD  authorised  in  one  Member  State  has  established  a  branch  in  another 
Member State, the competent authority of the home Member State of the CSD, in the 
exercise of its responsibilities and after informing the competent authority of the host 
Member State, may carry out on-site inspections in that branch. 

The  competent  authorities  from  the  host  Member  States  may  require  CSDs  which 
provide services in accordance with Article 21 to report to them periodically on their 
activities  in  those  host  Member  States,  in  particular  for  the  purpose  of  collecting 
statistics. 

The competent authority of the home Member State of the CSD shall, on the request 
of the competent authority of the host Member State and within an appropriate time 
frame,  communicate  the  identity  of  the  issuers  and  participants  to  the  securities 
settlement  systems  operated  by  the  CSD  which  provides  services  in  that  host 
Member  State  and  any  other  relevant  information  concerning  the  activities  of  that 
CSD in the host Member State. 

When, taking into account the situation of the securities markets in the host Member 
State,  the  activities  of  a  CSD that has established a  branch or interoperability links 
with  other  CSDs  or  security  settlement  systems  in  that  host  Member  State  have 
become  of  substantial  importance  for  the  functioning  of  the  securities  markets  and 
the  protection  of  the  investors  in  that  host  Member  State,  the  home  and  host 
competent authorities shall establish cooperation arrangements for the supervision of 
the activities of that CSD in the host Member State. 

Where the competent authority of the host Member State has clear and demonstrable 
grounds for believing that a CSD providing services within its territory in accordance 
with  Article  21  is  in  breach  of  the  obligations  arising  from  the  provisions  of  this 
Regulation,  it  shall  refer  those  findings  to  the  competent  authority  of  the  home 
Member State. 

Where,  despite  measures  taken  by  the  competent  authority  of  the  home  Member 
State  or  because  such  measures  prove  inadequate,  the  CSD  persists  in  acting  in 
breach  of  the  obligations  arising  from  the  provisions  of  this  Regulation,  after 
informing  the  competent  authority  of  the  home  Member  State,  the  competent 
authority of the host Member State shall take all the appropriate measures needed in 
order to ensure compliance with the provisions of this Regulation within the territory 
of the host Member State. ESMA shall be informed of such measures without delay. 

The  competent  authority  of  the  host  Member  State  may  refer  the  matter  to  ESMA, 
which  may  act  in  accordance  with  the  powers  conferred  on  it  under  Article  19  of 
Regulation (EU) No 1095/2010. 

6. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article  64  concerning  measures  for  establishing  the  criteria  under  which  the 
operations  of  a  CSD  in  a  host  Member  State  could  be  considered  of  substantial 
importance  for  the  functioning  of  the  securities  markets  and  the  protection  of  the 
investors in that host Member State. 

EN 

42 

   EN 

 
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. 

SECTION 5 
RELATIONS WITH THIRD COUNTRIES 

Article 23 
Third countries 

1. 

2. 

A  CSD  established  in  a  third  country  may  provide  CSD  services  either  through  a 
branch  or  by  way  of  direct  provision  of  services  to  issuers  and  participants 
established in the Union in relation to their activities in the Union and may establish 
links  with  a  CSD  established  in  the  Union,  only  where  that  CSD  is  recognised  by 
ESMA.  

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) 

(c) 

the  CSD  is  subject  to  effective  authorisation  and  supervision  ensuring  a  full 
compliance with the prudential requirements applicable in that third country; 

co-operation  arrangements  between  ESMA  and  the  competent  authorities  in 
that third country have been established pursuant to paragraph 7. 

3. 

When  assessing  whether  the  conditions  referred  to  in  paragraph  2  are  met,  ESMA 
shall consult with: 

(a) 

(b) 

the competent authorities of the Member States in which the third country CSD 
intends to provide CSD services; 

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. 

EN 

43 

   EN 

 
4. 

The  CSD  referred  to  in  paragraph  1  shall  submit  its  application  for  recognition  to 
ESMA.  

5. 

6. 

7. 

The applicant CSD shall provide ESMA with all information deemed necessary for 
its recognition. Within 30 working days from the receipt of the application, ESMA 
shall  assess  whether  the  application  is  complete.  If  the  application  is  not  complete, 
ESMA  shall  set  a  time  limit  by  which  the applicant CSD has  to  provide additional 
information.  

The recognition decision shall be based on the criteria set out in paragraph 2. 

Within  six  months  from  the  submission  of  a  complete  application,  ESMA  shall 
inform  the  applicant  CSD  in  writing  with  a  fully  reasoned  decision  whether  the 
recognition has been granted or refused. 

ESMA  shall,  in  consultation  with  the  authorities  referred  to  in  paragraph  3,  review 
the recognition of the CSD established in a third country in case of extensions by that 
CSD in the Union of the services referred to in paragraph 1 under the procedure set 
out in paragraphs 1 to 4.  

ESMA  shall  withdraw  the  recognition  of  that  CSD  where  the  conditions  and 
requirements  according  to  paragraph  2  are  no  longer  met  or  in  the  circumstances 
referred to in Article 18. 

The Commission may adopt a decision in accordance with the procedure referred to 
in  Article  66,  determining  that  the  legal  and  supervisory  arrangements  of  a  third 
country  ensure  that  CSDs  authorised  in  that  third  country  comply  with  legally 
binding  requirements  which  are  equivalent  to  the  requirements  set  out  in  this 
Regulation, that those CSDs are subject to effective supervision and enforcement in 
that  third  country  on  an  ongoing  basis,  and  that  the  legal  framework  of  that  third 
country  provides  for  an  effective  equivalent  system  for  the  recognition  of  CSDs 
authorised under third country legal regimes. 

In  accordance  with  Article  33  (1)  of  Regulation  (EU)  No  1095/2010,  ESMA  shall 
establish  cooperation  arrangements  with  the  relevant  competent  authorities  of  third 
countries  whose  legal  and  supervisory  frameworks  have  been  recognised  as 
equivalent  to  this  Regulation  in  accordance  with  paragraph  6.  Such  arrangements 
shall specify at least: 

(a) 

(b) 

the  mechanism  for  the  exchange  of  information  between  ESMA  and  the 
competent  authorities  of  third  countries  concerned,  including  access  to  all 
information regarding the CSDs authorised in third countries that is requested 
by ESMA; 

the  mechanism  for  prompt  notification  of  ESMA  where  a  third  country 
competent  authority  deems  a  CSD  it  is  supervising  to  be  in  breach  of  the 
conditions  of  its  authorisation  or  other  legislation  to  which  it  is  obliged  to 
adhere; 

(c) 

the procedures concerning the coordination of supervisory activities including, 
where appropriate, onsite inspections. 

EN 

44 

   EN 

 
Where a cooperation agreement provides for transfers of personal data by a Member 
State,  such  transfers  shall  comply  with  the  provisions  of  Directive  95/46/EC  and 
where  a  cooperation  agreement  provides  for  transfers  of  personal  data  by  ESMA, 
such transfers shall comply with the provisions of Regulation (EU) No 45/2001. 

8. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 64 concerning measures to specify the services for which a CSD established 
in  a  third  country  shall  apply  for  recognition  by  ESMA  under  paragraph  1  and  the 
information  that  the  applicant  CSD  shall  provide  ESMA  in  its  application  for 
recognition under paragraph 4.  

Chapter II 
Requirements for CSDs 

SECTION 1 
ORGANISATIONAL REQUIREMENTS 

Article 24 
General provisions 

1. 

2. 

3. 

4. 

5. 

6. 

A  CSD  shall  have  robust  governance  arrangements,  which  include  a  clear 
organisational  structure  with  well-defined,  transparent  and  consistent  lines  of 
responsibility, effective processes to identify, manage, monitor and report the risks to 
which  it  is  or  might  be  exposed,  and  adequate  remuneration  policies  and  internal 
control mechanisms, including sound administrative and accounting procedures. 

A CSD shall adopt policies and procedures which are sufficiently effective so as to 
ensure  compliance  with  this  Regulation,  including  compliance  of  its  managers  and 
employees with all the provisions of this Regulation. 

A CSD shall maintain and operate effective written organisational and administrative 
arrangements  to  identify  and  manage  any  potential  conflicts  of  interest  between 
itself,  including  its  managers,  employees,  board  members  or  any  person  directly  or 
indirectly  linked  to  them,  and  its  participants  or  their  clients.  It  shall  maintain  and 
implement  adequate  resolution  procedures  whenever  possible  conflicts  of  interest 
occur.  

A CSD shall make its governance arrangements and the rules governing its activity 
available to the public. 

A  CSD  shall  have  appropriate  procedures  for  its  employees  to  report  potential 
violations internally through a specific channel.  

A  CSD  shall  be  subject  to  frequent  and  independent  audits.  The  results  of  these 
audits  shall  be  communicated  to  the  board  and  made  available  to  the  competent 
authority. 

EN 

45 

   EN 

 
7. 

8. 

1. 

2. 

3. 

4. 

5. 

6. 

A CSD bound by capital links with another CSD, a holding company or with a credit 
institution  referred  to  in  Title  IV  shall  adopt  detailed  policies  and  procedures 
specifying  how  the  requirements  set  in  this  article  apply  to  the  group  and  to  the 
different entities of the group. 

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical standards specifying the monitoring tools for the risks of the CSDs referred 
to  in  paragraph  1,  and  the  responsibilities  of  the  key  personnel  in  respect  of  those 
risks,  the  potential  conflicts  of  interest  referred  to  in  paragraph  3  and  the  audit 
methods referred to in paragraph 6 at the CSD level as well as at the group level.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

Article 25 
Senior management, board and shareholders 

The senior management of a CSD shall be of sufficiently good repute and experience 
so as to ensure the sound and prudent management of the CSD. 

A  CSD  shall  have  a  board  of  which  at  least  one  third,  but  no  less  than  two,  of  its 
members are independent.  

The compensation of the independent and other non-executive members of the board 
shall not be linked to the business performance of the CSD.  

The board shall be composed of suitable members with an appropriate mix of skills, 
experience and knowledge of the entity and of the market.  

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. 

The CSD shareholders and participants who are in a position to exercise, directly or 
indirectly,  control  over  the  management  of  the  CSD  shall  be  suitable  to  ensure  the 
sound and prudent management of the CSD. 

7. 

A CSD shall: 

(a)  provide the competent authority with, and make public, information regarding 
the ownership of the CSD, and in particular, the identity and scale of interests 
of any parties in a position to exercise control over the operation of the CSD; 

(b) 

inform the competent authority of and make public any transfer of ownership 
which  gives  rise  to  a  change  in  the  identity  of  the  persons  exercising  control 
over the operation of the CSD. 

EN 

46 

   EN 

 
8. 

1. 

2. 

3. 

4. 

5. 

1. 

2. 

3. 

Within 60 working days from the receipt of the information referred to in paragraph 
7,  the  competent  authority  shall  take  a  decision  on  the  proposed  changes  in  the 
control  of  the  CSD.  The  competent  authority  shall  refuse  to  approve  proposed 
changes  in  the  control  of  the  CSD  where  there  are  objective  and  demonstrable 
grounds  for  believing  that  they  would  pose  a  threat  to  the  sound  and  prudent 
management of the CSD or to the ability of the CSD to comply with this Regulation.  

Article 26 
User committee 

A  CSD  shall  establish  user  committees  for  each  securities  settlement  system  it 
operates, which shall be composed of representatives of issuers and of participants to 
such  securities  settlement  systems.  The  advice  of  the  user  committee  shall  be 
independent from any direct influence by the management of the CSD. 

A CSD shall define the mandate for each established user committee, the governance 
arrangements necessary to ensure its independence and its operational procedures, as 
well  as  the  admission  criteria  and  the  election  mechanism  for  user  committee 
members. The governance arrangements shall be publicly available and shall ensure 
that the user committee reports directly to the board and holds regular meetings. 

User committees shall advise the board of the CSD on key arrangements that impact 
their  members,  including  the  criteria  for  accepting  issuers  or  participants  to  their 
respective securities settlement systems, service level and pricing structure.  

Without  prejudice  to  the  right  of  competent  authorities  to  be  duly  informed,  the 
members  of  the  user  committees  shall  be  bound  by  confidentiality.  Where  the 
chairman of a user committee determines that a member has an actual or a potential 
conflict of interest on a particular matter, that member shall not be allowed to vote on 
that matter. 

A CSD shall promptly inform the competent authority of any decision in which the 
board decides not to follow the advice of a user committee. 

Article 27 
Record keeping 

A  CSD  shall  maintain,  for  a  period  of  at  least  five  years,  all  the  records  on  the 
services and activity provided so as to enable the competent authority to monitor the 
compliance with the requirements under this Regulation. 

A CSD shall make the records referred to in paragraph 1 available upon request to 
the competent authority and the relevant authorities referred to in Article 11 for the 
purpose of fulfilling their mandates.  

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical standards to specify the details of the records referred to in paragraph 1 to 
be  retained  for  the  purpose  of  monitoring  the  compliance  of  CSDs  with  the 
provisions of this Regulation. 

EN 

47 

   EN 

 
 
ESMA shall submit those drafts to the Commission by six months from the date of 
entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

4. 

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing technical standards to establish the format of the records referred to in 
paragraph  1  to  be  retained  for  the  purpose  of  monitoring  the  compliance  of  CSDs 
with the provisions of this Regulation. 

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. 

Article 28 
Outsourcing 

1. 

Where a CSD outsources services or activities to a third party, it shall remain fully 
responsible  for  discharging  all  of  its  obligations  under  this  Regulation  and  shall 
comply at all times with the following conditions: 

(a)  outsourcing does not result in the delegation of its responsibility; 

(b) 

the relationship and obligations of the CSD towards its participants or issuers 
are not altered; 

(c) 

the conditions for the authorisation of the CSD do not effectively change; 

(d)  outsourcing  does  not  prevent  the  exercise  of  supervisory  and  oversight 
functions, including on site access to acquire any relevant information needed 
to fulfill those functions; 

(e)  outsourcing does not result in depriving the  CSD from the necessary systems 

and controls to manage the risks it faces; 

(f) 

(g) 

(h) 

the CSD retains the necessary expertise and resources for evaluating the quality 
of the services provided, the organisational and capital adequacy of the service 
provider, for supervising the outsourced services effectively and for managing 
the risks associated with the outsourcing;  

the  CSD  has  direct  access  to  the  relevant  information  of  the  outsourced 
services; 

the service  provider cooperates  with the competent authority  and the  relevant 
authorities  referred  to  in  Article  11  in  connection  with  the  outsourced 
activities; 

EN 

48 

   EN 

 
(i) 

the CSD ensures that the service provider meets the standards set down by the 
relevant data protection legislation which would apply if the service providers 
were established in the Union. The CSD is responsible for ensuring that those 
standards are set out in a contract between the parties and that those standards 
are maintained. 

The CSD shall define in a written agreement its rights and obligations and those of 
the service provider. The outsourcing agreement shall include the possibility of the 
CSD to terminate the agreement. 

A CSD shall make available upon request to the competent authority and the relevant 
authorities referred to in Article 11 all information necessary to enable them to assess 
the compliance of the outsourced activities with the requirements of this Regulation. 

The outsourcing of a core service shall be subject to authorisation under Article 17 
by the competent authority.  

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.  

SECTION 2 
CONDUCT OF BUSINESS RULES 

Article 29 
General provisions 

A  CSD  shall  be  designed  to  meet  the  needs  of  its  participants  and  the  markets  it 
serves. 

A  CSD  shall  have  clearly  defined  goals  and  objectives  that  are  measurable  and 
achievable,  such  as  in  the  areas  of  minimum  service  levels,  risk-management 
expectations and business priorities. 

2. 

3. 

4. 

5. 

1. 

2. 

3. 

A CSD shall have transparent rules for the handling of complaints.  

Article 30 
Participation requirements 

1. 

For each securities settlement system it operates a CSD shall have publicly disclosed 
criteria  for  participation  which  allow  fair  and  open  access.  Such  criteria  shall  be 
transparent,  objective,  risk-based,  and  non-discriminatory  so  as  to  ensure  fair  and 
open  access  to  the  CSD.  Criteria  that  restrict  access  shall  only  be  permitted  to  the 
extent that their objective is to control the risk for the CSD. 

EN 

49 

   EN 

 
2. 

3. 

4. 

5. 

6. 

A  CSD  shall  treat  requests  for  access  promptly  by  providing  a  response  to  such 
requests  within  one  month  at  the  latest  and  shall  make  the  procedures  for  treating 
access requests publicly available. 

A  CSD  may  only  deny  access  to  a  participant  meeting  the  criteria  referred  to  in 
paragraph 1 where it is duly justified in writing and based on a comprehensive risk 
analysis. 

In  case  of  refusal,  the  requesting  participant  has  the  right  to  complain  to  the 
competent authority of the CSD that has refused access.  

The responsible competent authority shall duly examine the complaint by assessing 
the  reasons  for  refusal  and  shall  provide  the  requesting  participant  with  a  reasoned 
reply.  

The  responsible  competent  authority  shall  consult  the  competent  authority  of  the 
place  of  establishment  of  the  requesting  participant  on  its  assessment  of  the 
complaint.  Where  the  authority  of  the  requesting  participant  disagrees  with  the 
assessment  provided,  the  matter  shall  be  referred  to  ESMA,  which  may  act  in 
accordance with the powers conferred on it under Article 19 of Regulation (EU) No 
1095/2010. 

Where the refusal by the CSD to grant access to the requesting participant is deemed 
unjustified,  the  responsible  competent  authority  shall  issue  an  order  requiring  that 
CSD to grant access to the requesting participant. 

A  CSD  shall  have  objective  and  transparent  procedures  for  the  suspension  and 
orderly exit of participants that no longer meet the criteria for participation referred 
to in paragraph 1.  

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 64 concerning measures to specify the risks which may justify a refusal by a 
CSD  of  access  to  participants  and  the  elements  of  the  procedure  referred  to  in 
paragraph 3. 

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing  technical  standards  to  establish  standard  forms  and  templates  for  the 
procedure referred to in paragraph 3. 

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. 

Article 31 
Transparency 

1. 

For each securities settlement system it operates, as well as for the each of the other 
services it performs, a CSD shall publicly disclose the prices and fees associated with 

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the  services  provided.  It  shall  disclose  the  prices  and  fees  of  each  service  and 
function  provided  separately,  including  discounts  and  rebates  and  the  conditions  to 
benefit  from  those  reductions.  It  shall  allow  its  customers  separate  access  to  the 
specific services provided. 

A CSD shall publish its price list so as to facilitate the comparison of offers and to 
allow customers to anticipate the price they shall have to pay for the use of services. 

A CSD shall be bound by its published pricing policy.  

A CSD shall provide to its customers information that allows reconciling the invoice 
with the published price lists. 

A  CSD  shall  disclose  to  all  participants  the  risks  associated  with  the  services 
provided. 

A CSD shall account separately for costs and revenues of the services provided and 
shall disclose that information to the competent authority. 

2. 

3. 

4. 

5. 

6. 

Article 32  
Communication procedures with participants and other market infrastructures 

CSDs  shall  use  in  their  communication  procedures  with  participants  of  the  securities 
settlement  systems  they  operate  and  with  the  market  infrastructures  they  interface  with  the 
recognised  communication  procedures  and  standards  for  messaging  and  reference  data  in 
order to facilitate efficient recording, payment and settlement. 

SECTION 3 
REQUIREMENTS FOR CSD SERVICES 

Article 33 
General provisions 

For  each  securities  settlement  system  it  operates  a  CSD  shall  have  appropriate  rules  and 
procedures, including robust accounting practices and controls, to help ensure the integrity of 
securities issues, reduce and manage the risks associated with the safekeeping and settlement 
of transactions in securities.  

Article 34  
Integrity of the issue 

1. 

A  CSD  shall  take  appropriate  reconciliation  measures  to  verify  that  the  number  of 
securities making up a securities issue or part of  a securities  issue submitted to the 
CSD  is  equal  to  the  sum  of  securities  recorded  on  the  securities  accounts  of  the 
participants  of  the  securities  settlement  system  operated  by  the  CSD.  Such 
reconciliation measures shall be conducted intraday.  

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2. 

3. 

4. 

1. 

2. 

3. 

4. 

5. 

6. 

Where appropriate and if other entities are involved in the reconciliation process for 
a  certain  securities  issue,  such  as  the  issuer,  registrars,  issuance  agents,  transfer 
agents,  common  depositories,  other  CSDs  or  other  entities,  the  CSD  shall  require 
such  entities  to  convene  adequate  cooperation  and  information  exchange  measures 
with the CSD so that the integrity of the issue is maintained. 

Securities  overdrafts,  debit  balances  or  securities  creation  shall  not  be  allowed  in  a 
securities settlement system operated by a CSD. 

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical  standards  to  specify  the  reconciliation  measures  a  CSD  shall  take  under 
paragraphs 1 to 3. 

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

Article 35 
Protection of participants' securities 

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.  

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.  

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').  

A  CSD  shall  publicly  disclose  the  level  of  protection  and  the  costs  associated  with 
the  different  levels  of  segregation  it  provides  and  shall  offer  these  services  under 
reasonable commercial terms. 

A  CSD  shall  not  use  the  securities  of  a  participant  for  any  purpose  unless  it  has 
obtained that participant's express consent.  

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical  standards  specifying  the  book-entry  methods  and  the  account  structures 
enabling  the  distinction  between  the  holdings  referred  under  paragraphs  1  to  3  and 
the methods of assessment thereof.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

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1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

Article 36 
Settlement finality 

A CSD shall ensure that the securities settlement system it operates offers adequate 
protection to participants. The securities settlement system operated by a CSD shall 
be  designated  and  notified  according  to  the  procedures  referred  to  in  point  (a)  of 
Article 2 of Directive 98/26/EC. 

A CSD shall establish procedures for its securities settlement systems that allow for a 
timely  achievement  of  settlement,  a  minimum  exposure  of  their  participants  to 
counterparty risk and liquidity risk and a low rate of settlement fails.  

A  CSD  shall  clearly  define  the  point  at  which  transfer  orders  in  a  securities 
settlement system are irrevocable, legally enforceable and binding on third parties.  

A CSD shall disclose the point in time at which transfers of funds and securities in a 
securities settlement system are irrevocable, legally enforceable and binding on third 
parties.  

Paragraphs 3 and 4 shall apply without prejudice to the provisions applicable to links 
and common settlement IT infrastructure provided under Article 45. 

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. 

The cash proceeds of securities settlements shall be available for recipients to use no 
later than by the end of the business day of the intended settlement date.  

All  securities  transactions  against  cash  between  direct  participants  to  the  securities 
settlement systems operated by a CSD shall be settled on a DVP basis.  

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical standards specifying the elements of the procedures referred to in paragraph 
2 allowing the timely achievement of settlement. 

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

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Article 37 
Cash settlement  

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. 

When it is not practical and available to settle in central bank accounts, a CSD may 
offer  to  settle  the  cash  payments  for  all  or  part  of  its  securities  settlement  systems 
through  accounts  opened  with  a  credit  institution.  If  a  CSD  offers  to  settle  in 
accounts  opened  with  a  credit  institution,  it  shall  do  so  in  accordance  with  the 
provisions of Title IV.  

Where  the  CSD  offers  settlement  both  in  central  bank  accounts  and  in  accounts 
opened  with  a  credit  institution,  its  participants  shall  have  the  right  to  choose 
between these two options.  

A CSD shall provide sufficient information to market participants to allow them to 
identify and evaluate the risks and costs associated with these services. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article  64  concerning  measures  defining  the  cases  when  the  settlement  of  the  cash 
payments in a specific currency through accounts opened with a central bank is not 
practical and available and the methods of assessment thereof.  

Article 38 
Participant default rules and procedures 

For  each  securities  settlement  system  it  operates,  a  CSD  shall  have  effective  and 
clearly defined rules and procedures to manage the default of a participant ensuring 
that  the  CSD  can  take  timely  action  to  contain  losses  and  liquidity  pressures  and 
continue to meet its obligations.  

A CSD shall make its default rules and procedures available to the public. 

A CSD shall undertake with its participants and other relevant stakeholders periodic 
testing  and  review  of  its  default  procedures  to  ensure  that  they  are  practical  and 
effective. 

In order to ensure consistent application of this article, ESMA may issue guidelines 
in accordance with Article 16 of Regulation (EU) No 1095/2010. 

1. 

2. 

3. 

4. 

5. 

1. 

2. 

3. 

4. 

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SECTION 4 
PRUDENTIAL REQUIREMENTS 

Article 39 
General requirements  

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

Article 40 
Legal risks 

1. 

2. 

3. 

For the purpose of its authorisation and supervision, as well as for the information of 
its  customers,  a  CSD  shall  have  rules,  procedures,  and  contracts  that  are  clear  and 
understandable including for all the securities settlement systems it operates.  

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.  

A CSD conducting business in different jurisdictions shall identify and mitigate the 
risks arising from any potential conflicts of laws across jurisdictions. 

Article 41 
General business risk 

A CSD shall have robust management and control IT tools to identify, monitor and manage 
general business risks, including business strategy, cash flows, and operating expenses.  

Article 42 
Operational risks  

1. 

2. 

3. 

A  CSD  shall  identify  all  potential  sources  of  operational  risk,  both  internal  and 
external, and minimise their impact through the deployment of appropriate IT tools, 
controls  and  procedures,  including  for  all  the  securities  settlement  systems  it 
operates.  

A CSD shall maintain appropriate IT tools that ensure a high degree of security and 
operational  reliability,  and  have  adequate  capacity.  Information  technology  tools 
shall adequately deal with the complexity, variety and type of services and activities 
performed so as to ensure high standards of security, the integrity and confidentiality 
of the information maintained. 

For  its  notary  and  central  maintenance  services  as  well  as  for  each  securities 
settlement  system  it  operates,  a  CSD  shall  establish,  implement  and  maintain  an 
adequate  business  continuity  policy  and  disaster  recovery  plan  to  ensure  the 
preservation  of  its  services,  the  timely  recovery  of  operations  and  the  fulfilment  of 

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4. 

5. 

6. 

7. 

1. 

2. 

3. 

4. 

the CSD’s obligations in the case of events that pose a significant risk of disrupting 
operations.  

The plan referred to in paragraph 3 shall at a minimum provide for the recovery of all 
transactions at the time of disruption to allow the participants of a CSD to continue to 
operate  with  certainty  and  to  complete  settlement  on  the  scheduled  date.  It  shall 
include  the  setting  up  of  a  second  processing  site  with  the  requisite  level  of  key 
resources,  capabilities  and  functionalities,  including  appropriately  skilled  and 
experienced staff.  

The CSD shall plan and carry out a programme of tests of the arrangements referred 
to in paragraphs 1 to 4. 

A  CSD  shall  identify,  monitor  and  manage  the  risks  that  key  participants  to  the 
securities settlement systems it operates, as well as service and utility providers, and 
other CSDs or other market infrastructures might pose to its operations. 

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical standards to specify the operational risks referred to in paragraphs 1 and 6, 
the  methods  to  test,  address  or  minimise  those  risks,  including  the  business 
continuity policies and disaster recovery plans referred to in paragraphs 3 and 4 and 
the methods of assessment thereof.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

Article 43 
Investment risks  

A CSD shall hold its financial assets at central banks or authorised credit institutions 
that  have  robust  accounting  practices,  safekeeping  procedures  and  internal  controls 
that fully protect these assets. 

A CSD shall have prompt access to its assets, when required. 

A CSD shall invest its financial resources only in cash or in highly liquid financial 
instruments with minimal market and credit risk. These investments shall be capable 
of being liquidated rapidly with minimal adverse price effect. 

A  CSD  shall  take  into  account  its  overall  credit  risk  exposures  to  individual 
institutions  in  making  its  investment  decision  and  shall  ensure  that  its  overall  risk 
exposure to any individual institution remains within acceptable concentration limits.  

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Article 44 
Capital requirements 

1. 

Capital, together with retained earnings and reserves of a CSD, shall be proportional 
to the risks stemming from the activities of the CSD. It shall be at all times sufficient 
to: 

(a) 

(b) 

(c) 

(d) 

ensure  that  the  CSD  is  adequately  protected  against  operational,  legal, 
business, custody and investment risks; 

cover potential general business losses, so that the CSD can continue providing 
services as a going concern; 

ensure an orderly winding-down or restructuring of the CSD's activities over an 
appropriate time span in case of default; 

allow the CSD to meet its current and projected operating expenses for at least 
six months under a range of stress scenarios. 

2. 

A CSD shall maintain a plan for the following: 

(a) 

(b) 

the raising of additional capital should its equity capital approach or fall below 
the requirements provided in paragraph 1;  

the achieving of an orderly wind down or reorganisation of its operations and 
services in case the CSD is unable to raise new capital.  

This  plan  shall  be  approved  by  the  board  of  directors  or  an  appropriate  board 
committee and updated regularly. 

3. 

ESMA shall develop in consultation with the members of the ESCB draft regulatory 
technical  standards  to  specify  the  capital,  retained  earnings  and  reserves  of  a  CSD 
referred to in paragraph 1 and the features of the plan referred to in paragraph 2.  

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010.  

SECTION 5 
REQUIREMENTS FOR CSD LINKS 

Article 45 
CSD links 

1. 

Before establishing a CSD link and on an ongoing basis once the link is established, 
all CSDs concerned shall identify, assess, monitor and manage all potential sources 
of risk for themselves and for their participants arising from the link arrangement. 

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2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

Link arrangements shall be submitted to authorisation as required under point (d) of 
Article 17(1). 

A link shall provide adequate protection to the linked CSDs and their participants, in 
particular  as  regards  possible  credits  taken  by  CSDs  and  the  concentration  and 
liquidity risks as a result of the link arrangement.  

A link shall be supported by an appropriate contractual arrangement that sets out the 
respective  rights  and  obligations  of  the  linked  CSDs  and,  where  necessary,  of  the 
CSDs' participants. A contractual arrangement with cross-jurisdictional implications 
shall provide for an unambiguous choice of law that govern each aspect of the link's 
operations. 

In  case  of  a  provisional  transfer  of  securities  between  linked  CSDs,  retransfer  of 
securities prior to the first transfer becoming final shall be prohibited.  

A CSD that uses an intermediary to operate a link with another CSD shall measure, 
monitor, and manage the additional risks arising from the use of that intermediary. 

Linked  CSDs  shall  have  robust  reconciliation  procedures  to  ensure  that  their 
respective records are accurate. 

Links  between  CSDs  shall  permit  DVP  settlement  of  transactions  between 
participants  in  linked  CSDs,  wherever  practical  and  feasible.  The  reasons  for  any 
non-DVP settlement shall be notified to the competent authorities. 

Interoperable securities settlement systems and CSDs that use a common settlement 
infrastructure shall establish identical moments of:  

(a) 

entry of transfer orders into the system; 

(b) 

irrevocability of transfer orders; 

(c) 

finality of transfers of securities and cash. 

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, 
the  reconciliation  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. 

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Powers  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation EU No 1095/2010. 

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Chapter III 
Conflict of laws 

Article 46 
Applicable law to proprietary aspects 

1. 

2. 

3. 

4. 

1. 

2. 

3. 

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.  

Where  the  account  is  used  for  settlement  in  a  securities  settlement  system,  the 
applicable law shall be the one governing that securities settlement system.  

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 Council24.  

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. 

Chapter IV 
Access to CSDs 

SECTION 1 
ACCESS OF ISSUERS TO CSDS 

Article 47 
Freedom to issue in a CSD authorised in the EU 

Without prejudice to the corporate law under which the securities are constituted, an 
issuer  shall  have  the  right  to  arrange  for  its  securities  to  be  recorded  in  any  CSD 
established in any Member State.  

When an issuer submits a request for recording its securities in a CSD, the latter shall 
treat  such  request  promptly  and  provide  a  response  to  the  requesting  issuer  within 
three months. 

A CSD may refuse to provide services to an issuer. Such refusal may only be based 
on  a  comprehensive  risk  analysis  or  on  the  absence  of  access  by  the  CSD  to 

24 

OJ L 177, 4.7.2008, p. 6. 

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transaction feeds from the market where the requesting issuer's securities are or will 
be traded.  

4. 

Where a CSD refuses to provide services to an issuer, it shall provide the requesting 
issuer with full reasons for its refusal.  

In  case  of  refusal,  the  requesting  issuer  shall  have  a  right  to  complain  to  the 
competent authority of the CSD that refuses to provide its services.  

The competent authority of that CSD shall duly examine the complaint by assessing 
the  reasons  for  refusal  provided  by  the  CSD  and  shall  provide  the  issuer  with  a 
reasoned reply.  

The  competent  authority  of  the  CSD  shall  consult  the  competent  authority  of  the 
place  of  establishment  of  the  requesting  issuer  on  its  assessment  of  the  complaint. 
Where the authority of the place of establishment of the requesting issuer disagrees 
with  that  assessment,  the  matter  shall  be  referred  to  ESMA,  which  may  act  in 
accordance with the powers conferred on it under Article 19 of Regulation (EU) No 
1095/2010. 

Where  the  refusal  by  the  CSD  to  provide  its  services  to  an  issuer  is  deemed 
unjustified,  the  responsible  competent  authority  shall  issue  an  order  requiring  the 
CSD to provide its services to the requesting issuer. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 64 concerning measures to specify the risks which may justify a refusal by a 
CSD of access to issuers and the elements of the procedure referred to in paragraph 
4.  

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing  technical  standards  to  establish  standard  forms  and  templates  for  the 
procedure referred to in paragraph 2. 

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. 

5. 

6. 

SECTION 2 
ACCESS BETWEEN CSDS 

Article 48 
Standard link access 

A CSD shall have the right to become a participant of another CSD in accordance with Article 
30 and subject to the authorisation of the CSD link provided under Article 17. 

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1. 

2. 

1. 

2. 

Article 49 
Customised link access 

Where a CSD requests another CSD to develop special functions for having access to 
the  latter,  the  receiving  CSD  may  reject  such  request  only  based  on  risk 
considerations. It may not deny a request on the grounds of loss of market share. 

The  receiving  CSD  may  charge  a  fee  from  the  requesting  CSD  for  making 
customised  link  access  available  on  a  cost-plus  basis,  unless  otherwise  agreed  by 
both parties. 

Article 50 
Procedure for CSD links 

When a CSD submits a request for access to another CSD, the latter shall treat such 
request promptly and provide a response to the requesting CSD within three months. 

A CSD may only deny acces to a requesting CSD where such access would affect the 
functioning  of  the  financial  markets  and  cause  systemic  risk  .  Such  refusal  can  be 
based only on a comprehensive risk analysis.  

Where  a  CSD  refuses access, it shall provide  the  requesting CSD with full  reasons 
for its refusal. 

In  case  of  refusal,  the  requesting  CSD  has  the  right  to  complain  to  the  competent 
authority of the CSD that has refused access.  

The responsible competent authority shall duly examine the complaint by assessing 
the reasons for refusal and shall provide the requesting CSD with a reasoned reply.  

The  responsible  competent  authority  shall  consult  the  competent  authority  of  the 
requesting  CSD  on  its  assessment  of  the  complaint.  Where  the  authority  of  the 
requesting CSD disagrees with the assessment provided, each of the two authorities 
may  refer  the  matter  to  ESMA,  which  may  act  in  accordance  with  the  powers 
conferred on it under Article 19 of Regulation (EU) No 1095/2010. 

Where  the  refusal  by  the  CSD  to  grant  access  to  the  requesting  CSD  is  deemed 
unjustified,  the  responsible  competent  authority  shall  issue  an  order  requiring  that 
CSD to grant access to the requesting CSD. 

3. 

Where  the  CSDs  agree  to  establish  a  link,  they  shall  submit  their  decision  for 
authorisation to their respective competent authorities in accordance with Article 17, 
which  shall  assess  whether  any  potential  risks  resulting  from  the  link  arrangement 
such as credit, liquidity, operational or any other relevant risks are fully mitigated. 

The  competent  authorities  of  the  respective  CSDs  shallrefuse  to  authorise  a  link 
when this could affect the functioning of the securities settlement systems operated 
by the applicant CSDs. 

4. 

The competent authorities of the respective CSDs shall consult each other regarding 
the approval of the link and may, if necessary in case of divergent decisions, refer the 

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5. 

6. 

1. 

2. 

3. 

matter to ESMA which may act in accordance with the powers conferred on it under 
Article 19 of Regulation (EU) No 1095/2010.  

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 64 concerning measures to specify the elements of the procedures referred to 
in paragraphs 1 to 3. 

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing  technical  standards  to  establish  standard  forms  and  templates  for  the 
procedures referred to in paragraphs 1 to 3. 

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. 

SECTION 3 
ACCESS BETWEEN A CSD AND ANOTHER MARKET INFRASTRUCTURE 

Article 51 
Access between a CSDs and another market infrastructure  

A CCP and a trading venue shall provide transaction feeds on a non-discriminatory 
and transparent basis to a CSD upon request by the CSD and may charge a fee for 
such transaction feeds to the requesting CSD on a cost-plus basis, unless otherwise 
agreed by both parties. 

A  CSD  shall  provide  access  to  its  securities  settlement  systems  on  a  non-
discriminatory and transparent basis to a CCP or a trading venue and may charge a 
fee for such access on a cost-plus basis, unless otherwise agreed by both parties. 

When  a  party  submits  a  request  for  access  to  another  party  in  accordance  with 
paragraph 1, such request shall be treated promptly and a response to the requesting 
party shall be provided within one month. 

The  receiving  party  may  only  deny  access  where  such  access  would  affect  the 
functioning  of  the  financial  markets  and  cause  systemic  risk.  It  may  not  deny  a 
request on the grounds of loss of market share. 

A  party  that  refuses  access  shall  provide  the  requesting  party  with  full  reasons  for 
such  refusal  based  on  a  comprehensive  risk  analysis.  In  case  of  refusal,  the 
requesting party has the right to complain to the competent authority of the party that 
has refused access.  

The responsible competent authority shall duly examine the complaint by assessing 
the reasons for refusal and shall provide the requesting party with a reasoned reply.  

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The  responsible  competent  authority  shall  consult  the  competent  authority  of  the 
requesting  party  on  its  assessment  of  the  complaint.  Where  the  authority  of  the 
requesting party disagrees with the assessment provided, each of the two authorities 
may  refer  the  matter  to  ESMA,  which  may  act  in  accordance  with  the  powers 
conferred on it under Article 19 of Regulation (EU) No 1095/2010. 

Where  the  refusal  by  a  party  to  grant  access  is  deemed  unjustified,  the  responsible 
competent  authority  shall  issue  an  order  requiring  that  party  to  grant  access  to  its 
services. 

4. 

5. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 64 concerning measures to specify the elements of the procedure referred to 
in paragraphs 1 to 3. 

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing  technical  standards  to  establish  standard  forms  and  templates  for  the 
procedure referred to in paragraphs 1 to 3. 

ESMA shall submit those draft implementing technical standards to the Commsssion 
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 previous subparagraph in accordance with the procedure laid down 
in Article 15 of Regulation (EU) No 1095/2010. 

TITLE IV  

CREDIT INSTITUTIONS DESIGNATED TO PROVIDE BANKING 
TYPE OF ANCILLARY SERVICES FOR CSDS' PARTICIPANTS 

Article 52 
Authorisation to provide banking type of ancillary services  

1. 

2. 

A  CSD  shall  not  provide  itself  any  banking  type  of  ancillary  services  set  out  in 
Section C of the Annex.  

By  way  of  derogation  from  paragraph  1,  when  a  national  competent  authority 
referred  to  in  Article  53(1)  of  this  Regulation  is  satisfied  that  a  CSD  has  all  the 
necessary safeguards in place to allow it to exercise ancillary services, the competent 
authority  may  submit  a  request  to  the  Commission  to  allow  this  CSD  also  to  carry 
out  the  ancillary  services  set  out  in  Section  C  of  the  Annex.  This  request  shall 
include: 

(a) evidence justifying the request, explaining in detail the arrangements the CSD has 
put in place to deal with all associated risks; 

(b)  a  reasoned  assessment  that  this  solution  is  the  most  effective  means  to  ensure 
systemic resilience; 

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(c) an analysis of the expected impact on the relevant financial market and financial 
stability.  

Following  a  detailed  impact  assessment,  a  consultation  of  the  undertakings 
concerned and after taking into account the 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.  

A CSD which benefits from a derogation shall be authorised as a credit institution as 
provided  in  Title  II  of  Directive  2006/48/EC.  This  authorisation  shall  be  limited 
exclusively  to  the  provision  of  the  banking  type  of  ancillary  services  that  it  is 
authorised to provide in accordance with paragraph 4 and shall imply the fulfilment 
of the prudential and supervision requirements provided in Article 57 and 58. 

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.  

The authorisation referred to in paragraph 3 shall cover the ancillary services set out 
in  Section  C  of  the  Annex  that  the  designated  credit  institution  or  a  CSD  that  has 
been granted a derogation under paragraph 2 of this Article may want to provide for 
its participants.  

Whenever  the  CSD  and  the  designated  credit  institution  belong  to  a  group  of 
undertakings ultimately controlled by the same parent undertaking, the authorisation 
as provided in Title II of Directive 2006/48/EC of such designated credit institution 
shall be limited exclusively to the provision of the banking type of ancillary services 
that  it  is  authorised  to  provide  in  accordance  with  paragraph  3  of  this  Article.  The 
same  requirement  applies  in  respect  of  a  CSD  that  has  been  granted  a  derogation 
under paragraph 2 of this Article. 

3. 

4. 

5. 

6. 

The  CSD  and  the  designated  credit  institutions  shall  comply  at  all  times  with  the 
conditions necessary for authorisation under this Regulation. 

The CSD shall, without undue delay, notify the competent authorities of any material 
changes affecting the conditions for authorisation. 

Article 53 
Procedure for granting and refusing authorisation  

1. 

The  CSD  shall  submit  its  application  for  authorisation  to  designate  a  credit 
institution,  as  required  under  Article  52,  to  the  competent  authority  of  the  Member 
State where it is established.  

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2. 

3. 

4. 

The  application  shall  contain  all  the  information  that  is  necessary  to  enable  the 
competent authority to satisfy itself that the CSD and the designated credit institution 
have established, at the time of the authorisation, all the necessary arrangements to 
meet  their  obligations  set  out  in  this  Regulation.  It  shall  contain  a  programme  of 
operations setting out the banking type of ancillary services envisaged, the structural 
organisation of the relations between the CSD and the designated credit institutions 
and how that credit institution intends to meet the prudential requirements as set out 
under Article 57(1), (3) and (4).  

The competent authority shall apply the procedure under Article 15(3) and (6). 

The competent authority shall, before granting authorisation to the CSD, consult the 
following authorities: 

(a)  The relevant authority referred to in point (a) of Article 11(1) on whether the 
envisaged  provision  of  services  by  the  designated  credit  institution  will  not 
affect  the  functioning  of  the  securities  settlement  system  operated  by  the 
applicant CSD; 

(b)  The competent authority referred to in Article 58(1) on the ability of the credit 
institutions to comply with the prudential requirements under Article 57. 

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. 

ESMA shall submit those draft regulatory technical standards to the Commission by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1095/2010. 

6. 

ESMA  shall  develop  in  consultation  with  the  members  of  the  ESCB  draft 
implementing  technical  standards  to  establish  standard  forms,  templates  and 
procedures for the consultation of the authorities referred to in paragraph 4 prior to 
granting authorisation. 

ESMA shall submit those draft implementing technical standards to the Commsssion 
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. 

Article 54 
Extension of the banking type of ancillary services  

1. 

A  CSD  that  intends  to  extend  the  banking  type  of  ancillary  services  for  which  it 
designates a credit institution shall submit a request for extension to the  competent 
authority of the Member State where that CSD is established.  

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2. 

The request for extension shall be subject to the procedure under Article 53.  

Article 55 
Withdrawal of authorisation 

1. 

The  competent  authority  of  the  Member  State  where  the  CSD  is  established  shall 
withdraw the authorisation in any of the following circumstances:  

(a)  where  the  CSD  has  not  made  use  of  the  authorisation  within  12  months, 
expressly renounces the authorisation or where the designated credit institution 
has provided no services or performed no activity for the preceding six months; 

(b)  where the CSD has obtained the authorisation by making false statements or by 

any other unlawful means; 

(c)  where  the  CSD  and  the  designated  credit  institution  are  no  longer  in 
compliance  with  the  conditions  under  which  authorisation  was  granted  and 
have  not  taken  the  remedial  actions  requested  by  the  competent  authority 
within a set time frame; 

(d)  where  the  CSD  and  the  designated  credit  institution  have  seriously  and 

systematically infringed the requirements set out in this Regulation. 

Before withdrawing authorisation, the competent authority shall consult the relevant 
authorities under point (a) of Article 11(1) and the authorities referred to in Article 
58(1) on the necessity to withdraw the authorisation except where such a decision is 
required urgently.  

ESMA,  any  relevant  authority  under  point  (a)  of  Article  11(1)  and  any  authority 
referred to in Article 58(1) may, at any time, request that the competent authority of 
the Member State where the CSD is established examine whether the CSD and the 
designated credit institution are still in compliance with the conditions under which 
the authorisation is granted.  

The competent authority may limit the withdrawal to a particular service, activity, or 
financial instrument. 

Article 56 
CSD Register 

Decisions  taken  by  competent  authorities  under  Articles  52,  54  and  55  shall  be 
notified to ESMA. 

ESMA shall introduce in the list that it is required to publish on its dedicated website 
in accordance with Article 19(3), the following information: 

(a) 

the name of each CSD which was subject to a decision under Articles 52, 54 
and 55;  

(b) 

the name of each designated credit institution;  

2. 

3. 

4. 

1. 

2. 

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(c) 

the list of banking type of ancillary services that a designated credit institution 
is authorised to provide for CSD's participants. 

3. 

The  competent  authorities  shall  notify  to  ESMA  those  institutions  that  provide 
banking type of ancillary services according to requirements of national law 90 days 
from the entry into force of this Regulation. 

Article 57 
Prudential requirements applicable to credit institutions designated to provide banking type 
of ancillary services  

1. 

2. 

3. 

A  credit  institution  designated  to  provide  banking  type  of  ancillary  services  shall 
provide  the  services  set  out  in  Section  C  of  the  Annex  that  are  covered  by  the 
authorisation. 

A  credit  institution  designated  to  provide  banking  type  of  ancillary  services  shall 
comply with any present or future legislation applicable to credit institutions.  

A  credit  institution  designated  to  provide  banking  type  of  ancillary  services  shall 
comply  with  the  following  specific  prudential  requirements  for  the  credit  risks 
related to these services in respect of each securities settlement system: 

(a) 

it shall establish a robust framework to manage the corresponding credit risks; 

(b) 

(c) 

(d) 

(e) 

it  shall  identify  the  sources  of  such  credit  risk,  frequently  and  regularly, 
measure and monitor corresponding credit exposures and use appropriate risk-
management tools to control these risks; 

it  shall  fully  cover  corresponding  credit  exposures  to  individual  borrowers 
using collateral and other equivalent financial resources; 

if collateral is required to manage its corresponding credit risk, it shall accept 
only collateral with low credit, liquidity and market risk; 

it  shall  set  and  enforce  appropriately  conservative  haircuts  and  concentration 
limits on collateral values constituted to cover the credit exposures referred to 
in point (c);  

(f) 

it shall put in place legally binding arrangements to allow collateral to be sold 
or pledged promptly, particularly in the case of cross-border collateral; 

(g) 

it shall set limits on its corresponding credit exposures; 

(h) 

it  shall  analyse  and  plan  for  how  to  address  any  potential  residual  credit 
exposures, adopt rules and procedures to implement such plans; 

(i) 

(j) 

it shall provide credit only to participants that have cash accounts with it; 

it  shall  provide  for  an  automatic  reimbursement  procedure  of  intraday  credit 
and discourage overnight credit through deterrent sanctioning rates.  

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4. 

A  credit  institution  designated  to  provide  banking  type  of  ancillary  services  shall 
comply  with  the  following  specific  prudential  requirements  for  the  liquidity  risks 
related to these services in respect of each securities settlement system: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

it shall have a robust framework to measure, monitor, and manage its liquidity 
risks  for  each  currency  of  the  security  settlement  system  for  which  it  act  as 
settlement agent;  

it  shall  monitor  continuously  the  level  of  liquid  assets  it  holds  and  determine 
the value of its available liquid assets taking into account appropriate haircuts 
on these assets;  

it shall measure continuously its liquidity needs and risks; in doing so, it shall 
take  into  account  the  liquidity  risk  generated  by  the  default  of  the  two 
participants to which it has the largest exposures; 

it  shall  mitigate  the  corresponding  liquidity  risks  with  immediately  available 
resources  such  as  prefunding  arrangements  and,  failing  this,  shall  seek  to 
obtain  the  necessary  credit  lines  or  similar  arrangements  to  cover  the 
corresponding liquidity needs only with institutions with an adequate risk and 
market  profile  and  it  shall  identify,  measure  and  monitor  its  liquidity  risk 
stemming from these institutions;  

it  shall  set  and  enforce  appropriate  concentration  limits  for  each  of  the 
corresponding  liquidity  providers  including  its  parent  undertaking  and 
subsidiaries; 

it  shall  determine  and  test  the  sufficiency  of  the  corresponding  resources  by 
regular and rigorous stress testing; 

it shall analyse and plan for how to address any uncovered liquidity shortfalls, 
and adopt rules and procedures to implement such plans; 

it  shall  base  its  intraday  credit  services  on  proportionate  and  at  least  same 
maturity  resources,  composed  of  capital,  cash  deposits,  and  borrowing 
arrangements; 

it  shall  deposit  the  corresponding  cash  balances  on  dedicated  accounts  with 
central banks, where practical and available; 

it shall ensure that it can re-use, with the informed consent of the customer, the 
collateral provided to it by a defaulting customer. 

5. 

EBA, in consultation with ESMA and the members of the ESCB, shall develop draft 
regulatory technical standards to specify the following:  

(a) 

the  frequency  of  the  credit  exposure  measuring  and  monitoring  framework 
referred to in point (b) of paragraph 3 and the types of risk-management tools 
that shall be used to control the risks derived from these exposures; 

(b)  what  constitutes equivalent financial resources for  the purpose of  point (c) of 

paragraph 3;  

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(c) 

the type of collateral that can be considered as having low credit, liquidity and 
market risk for the purpose of point (d) of paragraph 3; 

(d)  what constitutes appropriate haircuts for the purposes of point (e) of paragraph 

3 and point (b) of paragraph 4; 

(e) 

the  concentration  limits  on  collateral  values  referred  to  in  point  (e)  of 
paragraph 3, on credit exposures referred to in point (g) of paragraph 3 and on 
liquidity providers referred to in point (e) of paragraph 4; 

(f)  what  constitutes  deterrent  sanctioning  rates  for  the  purpose  of  point  (j)  of 

paragraph 3; 

(g) 

the details of the monitoring framework referred to in point (b) of paragraph 4 
and the methodology for calculating the value of available liquid assets for the 
purpose of point (b) of paragraph 4 and for measuring the liquidity needs and 
risks referred to in point (c) of paragraph 4;  

(h)  what  constitutes  immediately  available  resources  and  an  adequate  risk  and 

market profile for the purpose of point (d) of paragraph 4; 

(i) 

(j) 

the frequency, the type and the time horizons of the stress tests for the purpose 
of point (f) of paragraph 4; 

the  criteria  for  assessing  when  it  is  practical  and  available  to  deposit  cash 
balances  on  accounts  with  central  banks  for  the  purposes  of  point  (i)  of 
paragraph 4. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by 
six months from the date of entry into force of this Regulation. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 58 
Supervision of credit institutions designated to provide banking type of ancillary services  

1. 

2. 

3. 

The  competent  authority  referred  to  in  Directive  2006/48/EC  is  responsible  for  the 
authorisation  and  supervision  under  the  conditions  provided  in  that  directive  of  the 
credit  institutions  designated  to  provide  banking  type  of  ancillary  services  and  as 
regards their compliance with Article 57(3) and (4) of this Regulation. 

The competent authority referred to in Article 9 in consultation with the competent 
authority referred to paragraph 1 shall review and evaluate at least on an annual basis 
whether the designated credit institutions comply with Article 57(1), and whether all 
the  necessary  arrangements  between  the  designated  credit  institutions  and  the  CSD 
allow them to meet their obligations set out in this Regulation. 

In  view  of  the  protection  of  the  participants  to  the  securities  settlement  systems  it 
operates, a CSD shall ensure that it has access from the credit institution it designates 

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to all necessary information for the purpose of this Regulation and it shall report any 
breaches thereof to the competent authorities referred to in paragraph 1 and in Article 
9. 

4. 

In order to ensure consistent, efficient and effective supervision within the Union of 
credit institutions designated to provide banking type of ancillary services, EBA, in 
consultation  with  ESMA  and  the  members  of  the  ESCB,  may  issue  guidelines 
addressed to competent authorities in accordance with Article 16 of Regulation (EU) 
No 1093/2010. 

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Title V 
Sanctions  

Article 59  
Administrative sanctions and measures 

1. 

2. 

3. 

Member  States  shall  lay  down  rules  on  the  administrative  sanctions  and  measures 
applicable in the circumstances defined in Article 60 to the persons responsible for 
breaches of the provisions of this Regulation and shall take all measures necessary to 
ensure that they are implemented. Those sanctions and measures shall be effective, 
proportionate and dissuasive. 

By 24 months after the entry into force of this Regulation, the Member States shall 
notify the rules referred to in the first subparagraph to the Commission and ESMA. 
They  shall  notify  the  Commission  and  ESMA  without  delay  of  any  subsequent 
amendments thereto. 

The  competent  authorities  shall  be  able  to  apply  administrative  sanctions  and 
measures to CSDs, designated credit institutions, the members of their management 
bodies and any other persons who effectively control their business as well as to any 
other legal or natural person who is held responsible for a breach.  

In the exercise of their sanctioning powers in the circumstances defined in Article 60 
competent  authorities  shall  cooperate  closely  to  ensure  that  the  administrative 
sanctions and measures produce the desired results of this Regulation and coordinate 
their  action  in  order  to  avoid  possible  duplication  and  overlap  when  applying 
administrative  sanctions  and  measures  to  cross  border  cases  in  accordance  with 
Article 12. 

Article 60  
Sanctioning powers 

1. 

This article shall apply to the following provisions of this Regulation: 

(a)  provision of services set out in Sections A, B and C of the Annex in breach of 

Articles 14, 23 and 52;  

(b)  obtaining the authorisations required under Articles 14 and 52 by making false 
statements or by any other unlawful means as provided in point (b) of Article 
18(1), and point (b) of Article 55(1); 

(c) 

failure of CSDs to hold the required capital in breach of Article 44(1); 

(d) 

(e) 

failure  of  CSDs  to  comply  with  the  organisational  requirements  in  breach  of 
Articles 24 to 28;  

failure  of  CSDs  to  comply  with  the  conduct  of  business  rules  in  breach  of 
Articles 29 to 32; 

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(f) 

(g) 

(h) 

(i) 

(j) 

failure of CSDs to comply with the requirements for CSD services in breach of 
Articles 34 to 38; 

failure  of  CSDs  to  comply  with  the  prudential  requirements  in  breach  of 
Articles 40 to 44; 

failure  of  CSDs  to  comply  with  the  requirements  for  CSD  links  in  breach  of 
Article 45; 

abusive  refusals  by  CSDs  to  grant  different  types  of  access  in  breach  of 
Articles 47 to 51; 

failure of  designated credit  institutions to  comply with the  specific  prudential 
requirements related to credit risks in violation of Article 57(3); 

(k) 

failure  of  designated  credit  institutions  to  comply  with  specific  prudential 
requirements related to liquidity risks in violation of Article 57(4). 

2. 

Without  prejudice  to  the  supervisory  powers  of  competent  authorities,  in  case  of  a 
breach referred to in paragraph 1, the competent authorities shall, in conformity with 
national  law,  have  the  power  to  impose  at  least  the  following  administrative 
sanctions and measures:  

(a) 

(b) 

a  public  statement  which  indicates  the  person  responsible  for  the  breach  and 
the nature of the breach; 

an  order  requiring  the  person  responsible  for  the  breach  to  cease  the  conduct 
and to desist from a repetition of that conduct; 

(c)  withdrawal  of  the  authorisations  granted  under  Articles  14  and  52,  in 

accordance with Articles 18 and 55;  

(d)  dismissal  of  the  members  of  the  management  bodies  of  the  institutions 

responsible for a breach; 

(e) 

(f) 

(g) 

administrative  pecuniary  sanctions  of  up  to  twice  the  amounts  of  the  profit 
gained as a result of a breach where those amounts can be determined; 

in respect of a natural person, administrative pecuniary sanctions of up to EUR 
5  million  or  up  to  10  %  of  the  total  annual  income  of  that  person  in  the 
preceding calendar year; 

in respect of a legal person, administrative pecuniary sanctions of up to 10 % 
of  the  total  annual  turnover  of  that  person  in  the  preceding  business  year; 
where the undertaking is a subsidiary of a parent undertaking, the relevant total 
annual  turnover  shall  be  the  total  annual  turnover  resulting  from  the 
consolidated  account  of  the  ultimate  parent  undertaking  of  the  group  in  the 
preceding business year. 

3. 

Competent  authorities  may  have  other  sanctioning  powers  in  addition  to  those 
referred in paragraph 2 and may provide for higher levels of administrative pecuniary 
sanctions than those established in that paragraph. 

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4. 

Every  administrative  sanction  or  measure  imposed  for  breaches  of  this  Regulation 
shall  be  published  without  undue  delay,  including  at  least  information  on  the  type 
and  nature  of  the  breach  and  the  identity  of  persons  responsible  for  it,  unless  such 
disclosure  would  seriously  jeopardise  the  stability  of  financial  markets.  Where 
publication  would  cause  a  disproportionate  damage  to  the  parties  involved, 
competent  authorities  shall  publish  the  measures  and  sanctions  on  an  anonymous 
basis.  

The  publication  of  sanctions  shall  comply  with  fundamental  rights  as  laid  down  in 
the  Charter  of  Fundamental  Rights  of  the  European  Union,  in  particular  with  the 
right to respect of private and family life and the right to the protection of personal 
data. 

Article 61  
Effective application of sanctions  

1. 

When  determining  the  type  and  level  of  administrative  sanctions  or  measures,  the 
competent authorities shall take into account the following criteria:  

(a) 

the gravity and the duration of the breach; 

(b) 

the degree of responsibility of the responsible person;  

(c) 

(d) 

(e) 

the size and the financial strength of the responsible person, as indicated by the 
total  turnover  of  the  responsible  legal  person  or  the  annual  income  of  the 
responsible natural person; 

the importance of the profits gained, losses avoided by the responsible person 
or  the  losses  for  third  parties  derived  from  the  breach,  insofar  as  they  can  be 
determined; 

the level of cooperation of the responsible person with the competent authority, 
without prejudice to the need to ensure disgorgement of profits gained or losses 
avoided by that person; 

(f) 

previous breaches by the responsible person. 

Additional  factors  may  be  taken  into  account  by  competent  authorities,  if  such 
factors are specified in national law. 

Article 62  
Reporting of violations  

Member  States  shall  put  in  place  effective  mechanisms  to  encourage  reporting  of 
breaches of this Regulation to competent authorities. 

The mechanisms referred to in paragraph 1 shall include at least: 

(a) 

specific procedures for the receipt and investigation of reports of breaches;  

2. 

1. 

2. 

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(b) 

appropriate protection for persons who report potential or actual breaches; 

(c)  protection  of  personal  data  concerning  both  the  person  who  reports  the 
potential  or  actual  breaches  and  the  accused  person  in  compliance  with  the 
principles laid down in Directive 95/46/EC; 

(d) 

appropriate  procedure  to  ensure  the  rights  of  defence  and  to  be  heard  of  the 
accused person before the adoption of a final decision affecting that person and 
the  right  to  seek  effective  remedy  before  a  tribunal  against  any  decision  or 
measure affecting that person. 

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Title VI 
Delegated acts, transitional provisions, amendment to 
Directive 98/26/EC and final provisions 

Article 63 
Delegation of powers 

The Commission shall be empowered to adopt delegated acts in accordance with Article 64 
concerning  Articles  2(2),  22(6),  23(1),  23(4),  30(1),  30(3),  37(1),  50(1),  50(2),  50(3),  51(2) 
and 51(3). 

Article 64 
Exercice of the delegation 

1. 

2. 

3. 

4. 

5. 

The  power  to  adopt  delegated  acts  is  conferred  to  the  Commission  subject  to  the 
conditions laid down in this Article. 

The  delegation  of  power  referred  to  in  Article  63  shall  be  conferred  for  an 
indeterminate period of time from the date of entry into force of this Regulation.  

The delegation of powers referred to in Article 63 may be revoked at any time by the 
European Parliament or by the Council. A decision of revocation shall put an end to 
the  delegation  of  the  power  specified  in  that  decision.  It  shall  take  effect  the  day 
following  the  publication  of  the  decision  in  the  Official  Journal  of  the  European 
Union  or  at  a  later  date  specified  therein.  It  shall  not  affect  the  validity  of  any 
delegated acts already in force. 

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to 
the European Parliament and to the Council.  

A  delegated  act  adopted  pursuant  to  Article  63  shall  enter  into  force  only  if  no 
objection  has  been  expressed  either  by  the  European  Parliament  or  the  Council 
within a period of two months of notification of that act to the European Parliament 
and the Council or if, before the expiry of that period, the European Parliament and 
the  Council  have  both  informed  the  Commission  that  they  will  not  object.  That 
period shall be extended by two months at the initiative of the European Parliament 
or the Council. 

Article 65 
Implementing powers 

The Commission shall be empowered to adopt implementing acts under Article 23(6) and the 
third subparagraph of Article 52(2). Those implementing acts shall be adopted in accordance 
with the examination procedure referred to in Article 66(2). 

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Article 66 
Committee procedure 

1. 

2. 

1. 

2. 

3. 

4. 

The Commission shall be assisted by the European Securities Committee established 
by  Commission  Decision  2001/528/EC25.  That  Committee  shall  be  a  committee  in 
the meaning of Regulation (EU) No 182/2011. 

Article  5  of  Regulation  (EU)  No  182/2011  shall  apply  when  the  Commission 
exercises the implementing powers conferred by this Regulation. 

Article 67 
Transitional provisions 

Institutions  that  have  been  notified  to  ESMA  as  CSDs  under  the  conditions  set  out 
under Article 19(4) shall seek all authorisations that are necessary for the purposes of 
this Regulation within two years from the date of entry into force of this Regulation. 

Within  two  years  from  the  date  of  entry  into  force  of  this  Regulation,  a  CSD 
established  in  a  third  country  shall  seek  either  authorisation  from  the  competent 
authority  of  the  Member  State  in  which  the  CSD  provides  its  services  where  it 
intends to provide its services on the basis of Article 14, or recognition from ESMA 
where it intends to provide its services on the basis of Article 23.  

Where, on the date of entry into force of this Regulation, a CSD established in a third 
country, already provides services in a Member State in accordance with the national 
law  of  that  Member  State,  that  CSD  shall  be  permitted  to  continue  to  provide 
services  until  such  time  as  the  authorisation  referred  to  in  Article  14  or  the 
recognition referred to in Article 23 is granted or rejected. 

Links  between  a  CSD  established  in  a  third  country  and  CSDs  authorised  in  the 
Member  States  shall  be  accepted  until  such  time  as  the  authorisation  referred  to  in 
Article 14 or the recognition referred to in Article 23 is granted or rejected.  

Article 68 
Amendment to Directive 98/26/EC 

1. 

The  third  indent  of  the  first  subparagraph  of  point  (a)  of  Article  2  of  Directive 
98/26/EC is replaced by the following: 

"- 
designated,  without  prejudice  to  other  more  stringent  conditions  of  general 
application  laid  down  by  national  law,  as  a  system  and  notified  to  the  European 
Securities and Markets Authority by the Member State whose law is applicable, after 
that Member State is satisfied as to the adequacy of the rules of the system.". 

25 

OJ L 191, 13.7.2001, p. 45. 

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2. 

1. 

Six months after the entry into force of this Regulation at the latest, Member States 
shall adopt and publish and communicate to the Commission measures necessary to 
comply with the provisions of paragraph 1. 

Article 69 
Reports and review  

ESMA, in cooperation with EBA and the authorities referred to in Articles 9 and 11, 
shall  submit  annual  reports  to  the  Commission  providing  assessments  of  trends, 
potential  risks  and  vulnerabilities,  and,  where  necessary,  recommendations  of 
preventative  or  remedial  action  in  the  markets  for  services  covered  by  this 
Regulation. Such report shall include at least: 

(a)  An  assessment  of  settlement  efficiency  for  domestic  and  cross-border 
operations  for  each  Member  State  based  on  the  number  and  volume  of 
settlement  fails,  amount  of  penalties  referred  to  in  Article  7(4),  number  and 
volumes  of  buy-in  transactions  referred  to  in  Article  7(4)  and  any  other 
relevant criteria; 

(b)  An assessment measuring settlement which does not take place in the securities 
settlement  systems  operated  by  CSDs  based  on  the  number  and  volume  of 
transactions and any other relevant criteria; 

(c)  An  assessment  of  the  cross-border  provision  of  services  covered  by  this 
Regulation  based  on  the  number  and  types  of  CSD  links,  number  of  foreign 
participants to the securities settlement systems operated by CSDs, number and 
volume  of  transactions  involving  such  participants,  number  of  foreign  issuers 
recording their securities in a CSD in accordance with Article 47 and any other 
relevant criteria. 

2. 

The  reports  referred  to  in  paragraph  1  covering  a  calendar  year  shall  be 
communicated to the Commission before 30 April of the next calendar year. 

Article 70  

Entry into force and application 

1. 

2. 

3. 

This  Regulation  shall  enter  into  force  on  the  twentieth  day  following  that  of  its 
publication in the Official Journal of the European Union. 

Article 5 shall apply from 1 January 2015. 

Article 3(1) shall apply from 1 January 2020. 

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This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 7.3.2012 

For the European Parliament 
The President 

For the Council 
The President 

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ANNEX 

List of Services 

Section A 
Core services of central securities depositories 

1. 

2. 

3. 

Initial recording of securities in a book-entry system ('notary service'); 

Maintaining securities accounts at the top tier level ('central maintenance service'); 

Operating a securities settlement system ('settlement service'). 

Section B 
Non-banking type of ancillary services of central securities depositories  

Services  provided  by  the  CSDs  that  contribute  to  enhancing  the  safety,  efficiency  and 
transparency of the securities markets, including: 

1. 

Services related to the settlement service, such as: 

(a)  Organising  a  securities  lending  mechanism,  as  agent  among  participants  of  a 

securities settlement system; 

(b)  Providing  collateral  management  services,  as  agent  for  participants  of  a 

securities settlement system; 

(c)  Settlement matching, order routing, trade confirmation, trade verification. 

2. 

Services related to the notary and central maintenance services, such as: 

(a)  Services related to shareholders' registers; 

(b) 

Initiating  the  processing  of  corporate  actions,  including  tax,  general  meetings 
and information services; 

(c)  New  issue  services,  including  allocation  and  management  of  ISIN  codes  and 

similar codes; 

(d)  Order  routing  and  processing,  fee  collection  and  processing  and  related 

reporting; 

Maintaining  securities  accounts  in  relation  to  the  settlement  service,  collateral 
management and other ancillary services. 

Any other services, such as: 

(a)  Providing general collateral management services as agent; 

(b)  Providing regulatory reporting; 

(c)  Providing data and statistics to market/census bureaus; 

3. 

4. 

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(d)  Providing IT services.  

Section C 
Banking type of ancillary services  

1. 

Banking type of services for the participants to a securities settlement system related 
to the settlement service, such as  

(a)  Providing cash accounts; 

(b)  Accepting cash deposits; 

(c)  Providing cash credit; 

(d)  Lending securities.  

2. 

Banking  type  of  services  related  to  the  other  core  or  ancillary  services  listed  in 
Sections A and B, such as: 

(a)  Providing  cash  accounts  for  settlement  and  accepting  cash  deposits  from  the 

holders of securities accounts; 

(b)  Lending securities to the holders of securities accounts; 

(c)  Banking type of services facilitating the processing of corporate actions, such 

as:  

– 

– 

(i) 

(ii) 

Pre-financing income and redemption proceeds; 

Pre-financing tax reclaims. 

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ANNEX 

LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE 

1.1.  Title of the proposal/initiative  

1.2.  Policy area(s) concerned in the ABM/ABB structure 

1.3.  Nature of the proposal/initiative  

1.4.  Objective(s)  

1.5.  Grounds for the proposal/initiative  

1.6.  Duration and financial impact  

1.7.  Management method(s) envisaged  

2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

2.2.  Management and control system  

2.3.  Measures to prevent fraud and irregularities  

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget  line(s) 
affected  

3.2.  Estimated impact on expenditure  

3.2.1. Summary of estimated impact on expenditure  

3.2.2. Estimated impact on operational appropriations  

3.2.3. Estimated impact on appropriations of an administrative nature 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party participation in financing  

3.3.  Estimated impact on revenue

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative  

Regulation of the European Parliament and of the Council on improving securities settlement 
in the European Union and on central securities depositories (CSDs) and amending Directive 
98/26/EC 

1.2. 

Policy area(s) concerned in the ABM/ABB structure26  

Internal Market – Financial markets 

1.3. 

Nature of the proposal/initiative  

(cid:58) The proposal/initiative relates to a new action  

(cid:133) The proposal/initiative relates to a new action following a pilot project/preparatory action27  

(cid:133) The proposal/initiative relates to the extension of an existing action  

(cid:133) The proposal/initiative relates to an action redirected towards a new action  

1.4. 

Objectives 

1.4.1.  The Commission's multiannual strategic objective(s) targeted by the proposal/initiative  

Increase  the  safety  and  the  efficiency  of  the  financial  markets;  boost  the  internal  market  for 
financial services 

1.4.2. 

Specific objective(s) and ABM/ABB activity(ies) concerned  

Specific objectives: 

In the light of the general objectives above, the following specific objectives are sought: 

•  Increase safety of cross-border settlement 

•  Increase efficiency of cross-border settlement  

•  Ensure a level playing field for CSD services 

26 
27 

ABM: Activity-Based Management – ABB: Activity-Based Budgeting. 
As referred to in Article 49(6)(a) or (b) of the Financial Regulation. 

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82 

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1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

The proposal aims at: 

•  Increasing  the  safety  and  efficiency  of  settlement  by  harmonising  settlement  periods  and 

ensuring the large majority of transferable securities are issued in book entry form 

•  Improving  settlement  discipline  by  creating  an  appropriate  and  harmonised  framework  to 

prevent and address settlement fails 

•  Regulating appropriately all CSDs operating in the EU 

•  Ensuring consistency of requirements for CSDs and coordination in supervision by national 

regulators 

•  Reducing costs of cross-border settlement for investors 

•  Providing more choice to issuers and investors by increasing access to CSDs 

•  Increasing level playing field in the competition between CSD services, leading potentially 

to better quality and lower fees for CSD services for issuers and investors 

1.4.4. 

Indicators of results and impact  

Specify the indicators for monitoring implementation of the proposal/initiative. 

•  A  report  assessing  settlement  efficiency  for  each  EU  market.  Indicators  could  include 
number  and  volume  of  settlement  fails  (differentiated  between  domestic  and  cross-border 
transactions), volume of CSD penalties, number of buy-in procedures and number of cases 
of suspension of membership due to systematic failures to settle 

•  A  report  measuring  the  volume  of  market  claims,  to  assess  whether  the  harmonisation  of 

settlement periods has led to an increased efficiency of corporate actions 

•  A  report  measuring  internalisation  of  settlement  by  custodians  outside  of  securities 
settlement  systems  operated  by  CSDs.  This  information  is  important  in  terms  of  systemic 
risk and to help assess whether EU intervention may be necessary in this respect 

•  A  report  assessing  whether  cross-border  activity  is  increasing.  Indicators  could  include 
number of CSD links, number of foreign participants to CSDs, volume of transactions for 
foreign participants and numbers of issuers accessing foreign CSDs 

•  A  report  analysing  prices  in  the  EU  for  the  key  CSD  services,  such  as  settlement  and 

safekeeping for cross-border and domestic transactions 

•  A  survey  of  CSDs,  issuers  and  other  market  infrastructures  to  assess  to  what  extent  the 

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measures taken have eliminated barriers of access or whether obstacles (of practical or legal 
nature) still remain 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term  

As a result of the application of the Regulation in Member States: 

•  Settlement periods would be harmonised 

•  The large majority of transferable securities would be issued in book entry form 

•  Settlement  discipline  would  be  increased  by  creating  an  appropriate  and  harmonised 

framework to prevent and address settlement fails 

•  All CSDs operating in the EU would be regulated appropriately, based on the same set of 

requirements  

•  The  authorisation  and  supervision  of  CSDs  would  be  harmonised  and  the  coordination 

between national regulators would be improved 

•  Access to CSDs (by issuers, other CSDs and other market infrastructures) and from CSDs 
(to other CSDs and other market infrastructures) would be increased and the conditions for 
access would be harmonised 

1.5.2.  Added value of EU involvement 

•  Financial markets are inherently cross-border in nature and are becoming  increasingly so. 
The nature of problems identified with respect to CSD services, and particularly settlement 
in the EU relate essentially to cross-border transactions. Consequently, the effectiveness of 
remedies  implemented  in  an  autonomous  and  uncoordinated  way  by  individual  Member 
States would likely be very low in a cross-border context 

•  The  systemic  nature  of  CSDs  and  their  increasing  interconnection  in  Europe  calls  for 

coordinated action 

•  Related  aspects  are  covered  by  the  existing  acquis  communautaire,  notably  the  Financial 
Collateral Arrangements Directive, the Settlement Finality Directive (SFD), the Market in 
Financial  Instruments  Directive  (MiFID),  the  Capital  Requirements  Directive  (CRD)  as 
well as the possible future Securities Law Directive. Any new proposal would need to tie in 
perfectly with these EU measures. This can be best achieved in a common effort 

1.5.3.  Lessons learned from similar experiences in the past 

CSDs are important institutions for the financial markets in that they ensure the recording and 
safekeeping  of  securities  and  operate  the  systems  that  ensure  settlement  of  securities 
transactions, which means the effective delivery of securities against cash. As such, they are 

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important  financial  market  infrastructures,  alongside  trading  venues,  central  counterparties 
(CCPs) and trade repositories (TRs). Trading venues are regulated by the Market in Financial 
Instruments Directive (MiFID), while CCPs and TRs will also be regulated at EU level once 
the  proposal  for  a  regulation  on  derivative  transactions,  central  counterparties  and  trade 
repositories will be approved by the European Parliament and the Council and will enter into 
force.  MiFID  has  been  applied  since  November  2007  and  has  resulted  in  more  competition 
between venues for the trading of financial instruments and more choice for investors in terms 
of service providers and available financial instruments.  

1.5.4.  Coherence and possible synergy with other relevant instruments 

Certain  issues  are  already  covered  by  existing  Union  legislation.  For  instance,  securities 
settlement  systems  are  already  defined  by  Directive  98/26/EC  on  settlement  finality  in 
payment and securities settlement systems28 and Directive 2004/39/EC (MiFID) provides for 
certain  rules  of  access  by  market  participants  to  the  securities  settlement  system  of  their 
choice.  Other  issues  are  included  in  Commission  proposals.  For  instance,  the  Commission 
proposal on short selling and certain aspects of Credit Default Swaps also address settlement 
discipline  for  certain  categories  of  financial  instruments,  and  the  Commission  proposal  on 
derivative  transactions,  central  counterparties  and  trade  repositories  establish  rules  for 
clearing,  which  is  a  process  closely  related  to  settlement.  The  proposed  Regulation  is 
consistent with these Union texts.  

1.6. 

Duration and financial impact  

(cid:133) Proposal/initiative of limited duration  

–  (cid:133)  Proposal/initiative in effect from [DD/MM]YYYY to [DD/MM]YYYY  

–  (cid:133)  Financial impact from YYYY to YYYY  

(cid:58) Proposal/initiative of unlimited duration 

–  Implementation with a start-up period from 2013 to 2015, 

–  followed by full-scale operation. 

1.7.  Management mode(s) envisaged29  

(cid:133) Centralised direct management by the Commission  

(cid:133) Centralised indirect management with the delegation of implementation tasks to: 

–  (cid:133)  executive agencies  

28 
29 

OJ L166, 11.6/1998, p. 45 
Details  of  management  modes  and  references  to  the  Financial  Regulation  may  be  found  on  the  BudgWeb  site: 
http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html 

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–  (cid:58)  bodies set up by the Communities30 

–  (cid:133)  national public-sector bodies/bodies with public-service mission  

–  (cid:133)  persons entrusted with the implementation of specific actions pursuant to Title V of the 
Treaty  on  European  Union  and  identified  in  the  relevant  basic  act  within  the  meaning  of 
Article 49 of the Financial Regulation  

(cid:133) Shared management with the Member States  

(cid:133) Decentralised management with third countries  

(cid:133) Joint management with international organisations (to be specified) 

If more than one management mode is indicated, please provide details in the "Comments" section. 

Comments  

- 

30 

As referred to in Article 185 of the Financial Regulation. 

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

Article 81 of the draft Regulation establishing the European Securities and Markets Authority 
(ESMA) provides for the evaluation of the experience acquired as a result of the operation of 
ESMA within three years from the effective start of its operation. To this end, the Commission 
will  publish  a  general  report  that  will  be  forwarded  to  the  European  Parliament  and  to  the 
Council. 

2.2.  Management and control system  

2.2.1.  Risk(s) identified  

An  impact  assessment  has  been  carried  out  for  the  proposal  to  reform  the  financial 
supervision system in the EU to accompany the draft Regulations establishing the European 
Banking  Authority,  the  European  Insurance  and  Occupational  Pensions  Authority  and  the 
European Securities Markets Authority. 

The  additional  resource  to  ESMA  foreseen  as  a  result  of  the  current  proposal  is  needed  in 
order to allow ESMA to carry out its competences and notably its role in: 

•  Ensuring  a  harmonised  and  improved  regime  for  settlement  discipline  by  ensuring 
consistency of the monitoring and reporting of settlement fails and by drafting standards 
for the measures to prevent and address settlement fails 

•  Ensuring harmonisation and coordination of rules applying to CSDs by drafting standards 

•  Reinforcing and ensuring consistent application of national regulatory powers by issuing 
guidelines regarding the cooperation between authorities and drafting standards specifying 
the  content  of  the  application  for  authorisation  and  the  information  to  be  provided  to 
competent authorities and to be exchanged between authorities for supervision purposes 

•  Ensuring coordination and harmonisation of conditions of access granted to third country 

firms 

•  Ensuring  harmonisation  and  coordination  of  rules  regarding  access  to  CSDs  by 
participants, issuers and other CSDs, and between CSDs and other market infrastructures 

The  lack  of  this  resource  could  not  ensure  a  timely  and  efficient  fulfilment  of  the  role  of 
ESMA. 

2.2.2. Control method(s) envisaged 

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Management  and  control  systems  as  provided  for  in  the  ESMA  Regulation  will  apply  also 
with regard to the role of ESMA according to the present proposal.  

The  final  set  of  indicators  to  assess  the  performance  of  ESMA  will  be  decided  by  the 
Commission at the time of conducting the first required evaluation. For the final assessment, 
the  quantitative  indicators  will  be  as  important  as  the  qualitative  evidence  gathered  in  the 
consultations. The evaluation shall be repeated every three years. 

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures. 

For the purposes of combating fraud, corruption and any other illegal activity, the provisions 
of Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 
1999  concerning  investigations  conducted  by  the  European  Anti-Fraud  Office  (OLAF)  shall 
apply to the ESMA without any restriction. 

ESMA shall accede to the Interinstitutional Agreement of 25 May 1999 between the European 
Parliament,  the  Council  of  the  European  Union  and  the  Commission  of  the  European 
Communities  concerning  internal  investigations  by  the  European  Anti-Fraud  Office  (OLAF) 
and shall immediately adopt appropriate provisions for all ESMA staff. 

The  funding  decisions  and  the  agreements  and  the  implementing  instruments  resulting  from 
them shall explicitly stipulate that the Court of Auditors and OLAF may, if need be, carry out 
on-the-spot checks on the beneficiaries of monies disbursed by ESMA as well as on the staff 
responsible for allocating these monies. 

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3. 

3.1. 

Heading of 
multiannual 
financial 
framework 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget  line(s) 
affected  

•  Existing expenditure budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of  
expenditure

Contribution  

Number  
[Description………………………...……….] 

Diff./non-
diff. 
(31) 

from 
EFTA32 
countries 

from 
candidate 
countries33 

from third 
countries 

within the meaning 
of Article 18(1)(aa) 
of the Financial 
Regulation  

12.0404.01 

[ESMA – Subsidy under Titles 1 and 2 
(Staff and administrative expenditure)]

•  New budget lines requested  

Diff 

YES 

NO 

NO 

NO 

In order of multiannual financial framework headings and budget lines. 

- 

31 
32 
33 

Diff. = Differentiated appropriations / Non-diff. = Non-Differentiated Appropriations 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidate countries from the Western Balkans. 

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3.2. 

Estimated impact on expenditure  

3.2.1. 

Summary of estimated impact on expenditure  

Heading of multiannual financial framework:  

1A 

Competitiveness for Growth and Employment 

EUR million (to 3 decimal places) 

Year 
201334 

Year 
2014 

Year 
2015 

TOTAL 

DG: MARKT 

(cid:121) Operational appropriations  

12.0404.01 

of 

Appropriations 
administrative 
 from the envelope for specific programmes35  
Number of budget line 

an 

Commitments 

Payments 

(1) 

(2) 

nature 

financed 

0,385 
0,385 

0,354 
0,354 

0,354 
0,354 

TOTAL appropriations 
for DG MARKT 

(cid:121) TOTAL operational appropriations  

Commitments 

Payments 

Commitments 

Payments 

(cid:121)  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

(3) 

=1+1a 
+3 

=2+2a
+3 

(4) 

(5) 

(6) 

0,385 

0,385 

0,385 

0,385 

0,354 

0,354 

0,354 

0,354 

0,354 

0,354 

0,354 

0,354 

TOTAL appropriations  

Commitments 

=4+ 6 

0,385 

0,354 

0,354 

1,093 
1,093 

1,093 

1,093 

1,093 

1,093 

1,093 

34 
35 

Year N is the year in which implementation of the proposal/initiative starts. 
Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former "BA" lines), indirect 
research, direct research. 

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E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
under HEADING 1A 
of the multiannual financial framework 

Comments: 

Payments 

=5+ 6 

0,385 

0,354 

0,354 

1,093 

The operational appropriations above are related to the specific tasks allocated to ESMA according to the proposal: 

1) Tasks related to settlement discipline (2 regulatory standards, 1 guideline and repository tasks) 

These  measures  aim  to  introduce  consistent  monitoring  and  reporting  of  settlement  fails  and  to  reduce  settlement  fails  by 
implementing strict preventative and penalising measures. 

ESMA will have to draft two regulatory technical standards regarding the measures to prevent settlement fails, the monitoring tools 
for identifying the likely fails, the measures to address fails and the details of the monitoring and reporting system in respect of 
fails. 

ESMA  will  also  have  to  issue  guidelines  to  the  authorities  to  ensure  the  consistent,  efficient  and  effective  enforcement  of  the 
measures to prevent and address settlement fails. 

ESMA will also receive from the competent authorities the relevant data on settlement fails. 

2)  Tasks  related  to  authorisation  and  supervision  of  CSDs  (3  regulatory  standards,  4  implementing  standards,  1  guideline, 
repository and permanent tasks) 

These  measures  aim  to  introduce  a  consistent  authorisation  and  supervision  framework  for  CSDs  and  to  increase  cooperation 
between authorities. This should, inter alia, reduce regulatory burden on the CSDs with cross-border operations. 

ESMA will have to draft three regulatory technical standards and four implementing technical standards regarding the content of 
the  application  for  authorisation,  the  information  provided  by  CSDs  to  the  competent  authorities,  the  information  exchanged 
between authorities for the purpose of supervision, and the cooperation between home and host authorities. 

ESMA will have to draft guidelines to ensure the consistent, efficient and effective cooperation between authorities in the different 
assessments necessary for the application of the Regulation. 

EN 

91 

E

 
  
 
 
 
 
ESMA  will  have  to  maintain  a  detailed  register  of  CSD  activities  in  the  Union,  including  names  of  authorised  CSDs  and  of 
securities settlement systems operated by the CSDs, services provided, authorities in charge, third country CSDs, etc. 

ESMA  will  play  an  important  role  in  relation  to  non-EU  CSDs  intending  to  establish  a  branch  or  provide  services  without  the 
establishment of a branch in the Union or intending to establish a link with a CSD in the Union. Most notably ESMA will have to 
assess whether such CSDs are subject to effective authorisation and supervision in their home countries and will have to establish 
cooperation agreements with the competent authorities in those countries. 

ESMA will also have a number of other permanent tasks, including to intervene in case of disagreements between home and host 
authorities and to be informed in case of emergency situations. 

3) Tasks related to the requirements for CSDs (8 regulatory standards, 2 implementing standards, 1 guideline, permanent tasks) 

These measures aim to introduce consistent requirements for CSDs in respect of organisational and corporate governance matters, 
conduct of business, services and prudential framework. This should create a safer environment for CSD services and again reduce 
regulatory burden on the CSDs with cross-border operations. 

ESMA will have to draft eight regulatory technical standards and two implementing technical standards in order to specify certain 
details in relation to a number of regulatory requirements for CSDs, namely for organisational matters, record keeping, access by 
participants, reconciliation of securities accounts, segregation of securities accounts, settlement finality, operational risk mitigation, 
capital requirements and CSD links.  

ESMA will also have to issue guidelines regarding the CSDs' rules and procedures for managing a participant default. 

ESMA  will  also  have  permanent  tasks  derived  from  its  power  to  intervene  in  case  of  disagreements  between  authorities  with 
respect to participants' access to CSDs. 

4) Tasks related to the access requirements (3 implementing standards, permanent tasks) 

These measures aim to increase efficiency by allowing issuers and investors access to the CSD of choice. 

ESMA  will  have  to  draft  three  implementing  technical  standards  in  relation  to  the  procedure  of  access  from  issuers  to  CSDs, 
between CSDs, and between CSDs and other market infrastructures. 

EN 

92 

E

 
  
ESMA  will  also  have  permanent  tasks  derived  from  its  power  to  intervene  in  case  of  disagreements  between  authorities  with 
respect to access. 

5) Tasks related to the monitoring and evaluation of the proposal (2 annual reports) 

ESMA will have to produce two annual reports, one to assess settlement efficiency for each EU market, based on the standardised 
reporting of settlement fails by market players, and the second to assess whether cross-border activity is increasing, based on the 
data recorded in the ESMA register.  

EN 

93 

E

 
  
Heading of multiannual financial 
framework:  

5 

" Administrative expenditure " 

DG: MARKT 

(cid:121) Human resources  
(cid:121) Other administrative expenditure  

TOTAL DG MARKT 

Appropriations  

TOTAL appropriations 
under HEADING 5 
of the multiannual financial framework  

(Total 
= Total payments) 

commitments 

Year 
2013 

Year 
2014 

Year 
2015 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

Year 
201336 

Year 
2014 

Year 
2015 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial framework  

Commitments 

0,385 

0,354 

0,354 

Payments 

0,385 

0,354 

0,354 

EUR million (to 3 decimal places) 

TOTAL 

EUR million (to 3 decimal places) 

TOTAL 

1,093 

1,093 

36 

Year N is the year in which implementation of the proposal/initiative starts. 

EN 

94 

E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on operational appropriations  

–  (cid:133)  The proposal/initiative does not require the use of operational appropriations  

–  (cid:58)  The proposal/initiative requires the use of operational appropriations, as explained below: 

The  specific  objectives  of  the  proposal  are  set  out  under  1.4.2.  They  will  be  reached  through  the  legislative  measures  proposed,  to  be 
implemented at national level, and through the involvement of ESMA. While it is not possible to attribute concrete numerical outputs to 
each operational objective, ESMA's role and its contribution to the objectives of the proposal are described in detail in section 3.2.1. 

EN 

95 

EN 

 
  
3.2.3.  Estimated impact on appropriations of an administrative nature 

3.2.3.1.  Summary  

–  (cid:58)  The  proposal/initiative  does  not 

require 

the  use  of  administrative 

appropriations  

–  (cid:133)  The  proposal/initiative  requires  the  use  of  administrative  appropriations,  as 

explained below: 

EN 

96 

   EN 

 
3.2.3.2.   Estimated requirements of human resources  

–  (cid:58)  The proposal/initiative does not require the use of human resources  

–  (cid:133)  The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Comment: 

No additional human and administrative resources will be needed in DG MARKT as 
a result of the proposal. Resources currently deployed to follow directive 1997/9/EC 
will continue to do so. 

EN 

97 

   EN 

 
3.2.4.  Compatibility with the current multiannual financial framework  

–  (cid:133)  Proposal/initiative is compatible the current multiannual financial framework. 

–  (cid:58)  Proposal/initiative  will  entail  reprogramming  of  the  relevant  heading  in  the 

multiannual financial framework. 

The  proposal  provides  for  extra  tasks  to  be  carried  out  by  ESMA.  This  will  require  additional 
resources under budget line 12.0404. 

–  (cid:133)  Proposal/initiative requires application of the flexibility instrument or revision 

of the multiannual financial framework37. 

3.2.5.  Third-party contributions  

–  (cid:133)  The proposal/initiative does not provide for co-financing by third parties  

–  (cid:58)  The proposal/initiative provides for the co-financing estimated below: 

Appropriations in EUR million (to 3 decimal places) 

Year 
2013 

Year 
2014 

Year 
2015 

0,577 

0,531 

0,531 

0,577 

0,531 

0,531 

Member  States  via  EU 
national supervisors *  

TOTAL appropriations 
cofinanced  

Total 

1,639 

1,639 

*  Estimation  based  on  current  financing  mechanism  in  ESMA  regulation  (Member  States  60%,  Community 
40%) 

37 

See points 19 and 24 of the Interinstitutional Agreement. 

EN 

98 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.3. 

Estimated impact on revenue  

–  (cid:58)  Proposal/initiative has no financial impact on revenue. 

–  (cid:133)  Proposal/initiative has the following financial impact: 

– 

– 

(cid:133) 

(cid:133) 

on own resources  

on miscellaneous revenue  

EN 

99 

   EN 

 
Annex  to  the  Legislative  Financial  Statement  for  a  proposal  for  a  Regulation  of  the 
European  Parliament  and  of  the  Council  on  improving  securities  settlement  in  the 
European Union and on central securities depositories (CSDs) and amending Directive 
98/26/EC 

The  costs  related  to  tasks  to  be  carried  out  by  ESMA  have  been  estimated  for  staff 
expenditure (Title 1), in conformity with the cost classification in the ESMA draft budget for 
2012 submitted to the Commission. 

The  proposal  of  the  Commission  include  provisions  for  ESMA  to  develop  13  regulatory 
technical standards and 9 implementing technical standards that should ensure that provisions 
of  highly  technical  nature  are  consistently  implemented  across  the  EU.  In  addition,  ESMA 
will also have to develop 3 guidelines, mainly to ensure the efficient and effective cooperation 
between  authorities  and  2  annual  reports  to  monitor  and  evaluate  the  effectiveness  of  the 
Regulation, will hold the register of CSDs and will have a number of other permanent tasks.  

Regarding  the  timing, it has been assumed  that the  Regulation will enter into  force in  early 
2013, and therefore  that  the additional ESMA resources are required from 2013. Additional 
staff  has  been  estimated  only  for  the  technical  standards,  guidelines  and  reports  to  be 
produced by ESMA; it has been assumed that ESMA can carry out its other permanent tasks, 
such  as  in  relation  to  non-EU  CSD  recognition  and  mediation  between  authorities  with  its 
existing  staff.  As  regards  the  nature  of  positions,  the  successful  and  timely  delivery  of  new 
technical standards will require, in particular, additional policy, legal and impact assessment 
officers. 

The following assumptions were applied to assess the impact on number of FTEs required to 
develop technical standards, guidelines and reports: 

•  One  policy  officer  drafts  on  average  5  technical  standards  a  year  and  the  same  policy 
officer  can  draft  the  related  guidelines  or  reports.  This  implies  that  4  policy  officers  are 
needed;  

•  One impact assessment officer is needed for the technical standards above; 

•  One legal officer is needed for the technical standards and guidelines above. 

This means an additional 6 FTEs are needed from 2013. 

It  was  assumed  that  this  increase  in  FTEs  will  be  maintained  in  2014  and  2015  since  the 
standards will most likely be finalised only in 2014 and amendments may be required in 2015. 

Other assumptions: 

•  Based on the distribution of FTEs in 2012 draft budget, the additional 6 FTEs are assumed 
to  be  comprised  of  4  temporary  agents  (74%),  1  seconded  national  expert  (16%)  and  1 
contractual agent (10%); 

•  Average annual salary costs for different categories of personnel are based on DG BUDG 

guidance; 

•  Salary weighting coefficient for Paris of 1.27; 

EN 

100 

   EN 

 
•  Training costs assumed at €1,000 per FTE per year; 

•  Mission  costs  of  €10,000,  estimated  base d  on  2012  draft  budget  for  missions  per 

headcount; 

•  Recruiting-related  costs  (travel,  hotel,  medical  examinations,  installation  and  other 
allowances,  removal  costs,  etc)  of  €12,700,  estimated  based  on  2012  draft  budget  for 
recruiting per new headcount. 

The  method  of  calculating  the  increase  in  the  required  budget  for  the  next  three  years  is 
presented  in  more  detail  in  table  below.  The  calculation  reflects  the  fact  that  that  the 
Community budget funds 40% of the costs. 

Cost type 

Calculation 

Amount (in thousands) 

2013 

2014 

2015 

Total 

Title 1: Staff expenditure 

11 Salaries and allowances 
- of which temporary agents 
- of which SNEs 
- of which contract agents 

=4*127*1,27 
=1*73*1,27 
=1*64*1,27 

12 Expenditure related to recruitment 

=6*12,7 

13 Mission expenses 

15 Training 

=6*10 

=6*1 

Total Title 1: Staff expenditure 

Of which Community contribution (40%) 
Of which Member State contribution (60%) 

645 
93 
81 

76 

60 

6 

961 

385 
577 

645 
93 
81 

60 

6 

885 

354 
531 

645 
93 
81 

1,935 
278 
244 

76 

180 

18 

60 

6 

885 

2,732 

354 
531 

1,093 
1,639 

The  following  table  presents  the  proposed  establishment  plan  for  the  four  temporary  agent 
positions. 

Function group and grade 

Temporary 
posts 

AD 8 
AD 7 
AD 6 
AD 5 

AD total 

1 
1 
1 
1 

4 

EN 

101 

   EN