CSD regulation: The missing piece in the European post-trade puzzle?

Abstract

The European Commission is soon to issue a regulatory proposal on central securities depositories (CSDs). After the adoption of the MiFID in 2004 and the more recent proposal to regulate CCPs and OTC derivatives, this new piece of legislation will cover the last layer in the securities processing chain: settlement. By harmonising safety standards and access rights among infrastructures, the upcoming regulation could bring important benefits to financial markets in terms of efficiency and financial stability. However, key issues will need to be debated in order to find the right balance between competition and safety, such as the definition of CSD services, safeguards to be imposed on the banking services of CSDs and supervision. These discussions will have to take account of other European and international developments which are affecting the dynamics of the industry, in particular by encouraging CSDs to develop new services and, increasingly, compete for cross-border business.