CSDR implementation in VP / VP Securities

CSDR implementation in VP

The European Central Depository Regulation – CSDR - is the European set of rules to regulate settlement and harmonise the authorisation and supervision of EU central securities depositories (CSDs). The regulation entered into force on 17 September 2014.  

What does it mean?

The CSDR, together with EMIR, Markets in Financial Instruments Directive (recast) and the Markets in Financial Instruments Regulation, ensures that systemically important securities infrastructures are subject to common EU rules. The objectives of the CSDR are consistent and complimentary to those of TARGET2Securities (T2S). The CSDR is intended to harmonise the legal aspects of securities settlement and the rules for CSDs at an EU-wide level, therefore facilitating also T2S, which aims to harmonise operational aspects of securities settlement.

Each CSD has to apply for authorisation, i.e. a license to operate, according to CSDR.

As one of the first CSDs in Europe, VP SECURITIES applied for a CSDR authorisation 30 May 2017 and has been granted an authorisation from the Danish FSA (Finanstilsynet), with effect from 3 January 2018, as of which VP Securities and our customers will be subject to CSDR. The VP LUX application for the CSDR authorisation has been forwarded 29 September 2017, and is currently being reviewed by the authorities in Luxembourg.

Who does CSDR effect?

The CSDR applies to all market infrastructures, banks, brokers and operators involved with securities settlement. CSDR applies to all transferable securities as defined under the Markets in Financial Instruments Directive. Members of the European System of Central Banks and other national or public entities that perform similar services, which would otherwise qualify as CSDs, are exempt from certain requirements under the CSDR, including those relating to authorisation.

The CSDR imposes a number of reporting duties on the CSDs and their participants. Furthermore, a new settlement discipline regime is introduced, however, as the legislation related to settlement discipline is pending approval, the final rules are still uncertain, as well as the deadline for implementation.

What does VP do?

In order to secure that we are compliant to CSDR, VP has initiated a project to design and implement the necessary adaption to CSDR. The project takes both internal and external consequences of the CSDR into consideration as well as compliance, business and technical concerns. The project has been split in two parts, with CSDR I taking on the reporting requirements of CSDs and their participants. The reporting requirements are divided in two categories:

  1. Transaction data
  2. Static data
    • On securities accounts
    • On CSD Participants /Issuers

VP has successfully ensured that all securities accounts have been marked according to the specifications of our customers and the registration of static data on Participants and Issuers (LEIs and IBANs) is well under way.

The new fields related to transaction data will be included in the transfer orders once the new settlement discipline regime enters into force. Although not mandatory, the necessary fields will be available in all transfer orders as from the implementation of DKK settlement on T2S (29 October 2018) and will be available in the test environment as of 9 April 2018.

As to the second part of CSDR – CSDR II – VP has established a settlement discipline project management group to ensure system development and implementation on time. The project is scoped and specification of the solution and requirements are currently being determined. Furthermore, VP meets regularly with our customers and is addressing the expected CSDR II-related changes through a CSDR Working Group that includes all major industry/sector stakeholders.

Customer impact going forward is primarily related to the penalty mechanism, partial settlement, buy-in and suspension of a participant as well as a new fee due to administration of the penalty mechanism - VP will maintain a close dialogue with our customers to establish a smooth transition.

How do you receive information regarding CSDR?

If you would like to receive information regarding the process and status of the VP SECURITIES CSDR implementation, please subscribe to VP News & Insights and register the content preference Harmonisation, standardisation & Regulation. Sign up for VP News & Insights here.

If you would like to receive information of a more operational character, you may subscribe to VP Information via our Customer Center. Sign up for VP Information here. Please note that subscription requires access to the VP Customer Center. If you are a VP customer and do not have access to our Customer Center please click here to create a profile.  

Where can you find more information?

  • Read the CSDR Q&A -  Published and updated by VP November 2017. 
  • Read the CSDR level 1: Regulation on approving securities settlement in the European Union and on central securities depositories. The legislation entered into force 17 September 2014. 
  • Read the RTS level 2: Regulatory Technical Standards on authorisation, supervisory and operational requirements for central securities depositories. The legislation entered into force 30 March 2017.
  • Read the ITS level 2: The associated Implementation Technical Standards with regard to regulatory technical standards on supervisory requirements applicable to CSDs. The legislation entered into force 30 March 2017.
  • Read the RTS level 2 on settlement discipline: The draft Regulatory Technical Standards on settlement discipline. The draft also includes the feedback from the second and third consultations and the proposed changes made by ESMA in key areas as well as the related impact assessment. The RTS on settlement discipline has not entered into force yet.