Securities settlement

Any transaction in securities must be followed by a post-trade flow of processes. These processes lead to the settlement of the trade, which means the delivery of securities to the buyer against the delivery of cash to the seller.

Settlement may occur on the day of the trade, but more often a number of days later depending on

  • the type of securities
  • the type of trading venue
  • the type of market

Role of CSDs in securities settlement

CSDs operate the infrastructure that enables the so-called securities settlement systems. In particular, CSDs

  • allow the registration and safekeeping of securities
  • allow the settlement of securities in exchange for cash
  • track how many securities have been issued and by whom
  • track each change in the ownership of these securities

CSD Regulation

Settlement across borders presents higher risks and costs for investors within one country. To harmonise rules in this area the EU has adopted a regulation on CSDs (CSDR).

The main objective of the regulation is to increase the safety and efficiency of securities settlement and settlement infrastructures in the EU. It does this by introducing

  • shorter settlement periods
  • cash penalties and other deterrents for settlement fails
  • strict organisational, conduct of business and prudential requirements for CSDs
  • passport system allowing authorised CSDs to provide their services across the EU
  • increased prudential and supervisory requirements for CSDs and other institutions providing banking services that support securities settlement