CSDR is a license to more cross-border business

International CSD regulation and T2S are among the enablers of the great vision of one European capital market. While nationalism and internationalism are two strong forces in opposition to each other in Europe it is hard to predict speed and scope of a more European capital market. A CSD with a CSDR license is under all circumstances an enabler of more cross-border investments and issuance.


“It has been hard work for VP Securities to obtain a CSDR licence and now you are lucky to be able to think further than CSDR, and you can start utilizing a more international infrastructure. If a CSD is still struggling to obtain its license, it will have fewer ressources for technology, cyber security and new services, which are all highly relevant focus areas,” says Anna Kulik, the Secretary General from the European Central Securities Depositories Association (ECSDA). She is heading the association of 38 European CSDs. Five of them have obtained the CSDR passport and one of them is VP Securities. Anna Kulik visited Denmark and presented to Nordic market participants in late September at the Market Advisory Group meeting at VP securities in Copenhagen.

“Every EU CSD is on this journey, and everyone wants to go there. It is a big task to obtain the license and be able to support this very high level of security and transparency, which CSDR is all about. Every CSD is different and the number of links and complexity in the business may for sure complicate the ability to comply with CSDR,” she says.

National or international

Anna Kulik regards a CSDR-licensed CSD as a basis for a two-way traffic in post trade. It supports easier and more efficient cross-border issuance and attraction of foreign investors. And it supports investors in international investments. As such CSDR and also T2S are enablers of a single European capital market.

“I hope this great vision lives on, and that we will see a continuation of a process, where national markets and infrastructures are becoming more international. Geopolitically we are currently seeing strong nationalistic tendencies, although I hope that the future European Commission and Parliament will remain pro-European with regard to the capital market agenda.”

“In terms of post trade, it is a question of when the authorities of one Member State will be comfortable to let investors trust the asset protection framework of another state. The CSDR provided clear grounds ensuring that investors can safely access a CSD in another State of the European Economic Area. Or another jurisdiction with equivalent to the CSDR legislation. It is a first step, but is not sufficient in itself to see more cross-border investments going through financial market infrastructures,” adds Anna Kulik.

“It looks like smaller countries are bigger supporters of internationalisation. In the Baltics, they have managed to merge three infrastructures into one legal entity, although they still needed to keep three securities settlement systems. For some questions the authorities feel safer to play a national card. CSDs will continue consolidating the operational side of the securities settlement system. It is necessary for higher efficiency. At the same time, the remaining issues preventing deep consolidation are fundamental: such as limitation on access to central banks, differences in the national asset protection framework, absence of a single CSD participant insolvency regime, as well as the early stages of supervisory convergence between CSDs’ competent authorities. Solving these questions require political adherence to a deeper and more ambitious capital market union project.”

CSDs in complexity

The head of ECSDA said to the Danish audience, that CSDs have a lot on their plate right now, with CSDR as just one part of the puzzle. Compliance to a more comprehensive array of regulation and frameworks is another big task. New technology is also having great influence on the post trade infrastructure, and the CSDs must evaluate and deal with increased automation, DLT, AI, Fintech and further harmonisation and interoperability.

“This is the background for CSDs to meet stakeholder needs and drivers in the financial marketplace. CSDs are also looking to support the demand to bring cross-border issuance, develop of innovative asset optimisation services, ensure cyber resilience and much more,” explains Anna Kulik.

CSDR is an important step

“CSDR marks the evolution from a European situation with quite fragmented national legislation to a single pan-European framework for all CSD operations in the Union” says Anna Kulik.  CSDR and T2S give European CSDs a safer entry to optimise service offering and technology across different countries. CSDs providing single access to multiple markets will bring their participants present in several markets real benefits, particularly for the management of assets and liquidity.

“I enjoyed visiting the CSD and the market participants in Copenhagen. It’s a good exercise to have this kind of authentic dialogue between CSD and market participants. Infrastructure and market participants should move ahead in partnership,” says the head of ESCDA.

Henrik Ohlsen

Customer Relations & Sales Director

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