The European post-trade infrastructures after Brexit: A central securities depository perspective

Abstract

This paper tries to imagine the Central Securities Depositories’ (CSDs) perspective for the next five years (2025). Brexit seems, at the writing of this paper (ie beginning of September 2019), an immediate milestone for all European financial markets, and as such will impact CSDs’ business. The paper starts by analysing different consequences of Brexit. In the end, one of the main conclusions is that Brexit will not be a zero-sum game among European financial markets, but a losing game for all of them. Europe will lose as a whole in favour of other regions due to increasing competition and globalisation. This idea is further reinforced by different political and economic threats for Europe: populism, nationalism, protectionism and the turndown of the economic cycle draw a pessimistic forecast for investment flows coming to Europe. Obviously, this negative economic perspective might hinder core CSD business. At the same time, CSDs have to cope with many new regulations (Central Securities Depository Regulation [CSDR], Shareholders Right Directive 2 [SRD2], etc.) and public initiatives (Eurosystem projects) with the real risk of dedicating many resources to fulfil risk-related public requirements, but not being able to follow the path of new technologies. New technologies will probably shape the CSD business in five to ten years’ time. As a result, European CSDs should be able to focus on new business paradigms that digitalisation will bring us. Threats and opportunities will stem from the new technology: distributed ledger technology, robotics and big data. Finally, this paper briefly mentions some of the opportunities and challenges that CSDs will likely have to cope with, from today until 2025.