Central securities depositories

A central securities depository (CSD) is an organisation that is specialised in the recording and safe keeping of securities as well as in the settlement of securities transactions in financial markets. CSDs record newly issued securities and maintain central securities accounts in which they enter the names of the owners of the securities. Additional services that they offer are the settlement of securities in exchange for cash and the settlement of securities transactions in financial markets: the purchaser receives the traded security and makes payment to the seller; the seller receives the payment and, at the same time, the traded security is debited from the seller’s account. For these purposes, the CSD operates a securities settlement system whose participants are in particular banks and central counterparties.

The European Union has sought to strengthen core market infrastructures in Europe through the adoption of Regulation (EU) No. 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories (CSD Regulation, CSDR). In April 2012, the Committee on Payments and Settlement Systems (CPSS) of the Bank of International Settlements (BIS) and the International Organisation of Securities Commissions (IOSCO) adopted global standards for financial market infrastructures. This was in recognition of the necessity for prudential requirements due to the global nature of financial markets and the systemic importance of CSDs. 

The CSDR, which entered into force in the EU on 17 September 2014, is the regulatory framework for the settlement of cross-border securities transactions in the EU. In order to harmonise the highly fragmented market of European CSDs and thereby achieve greater security and efficiency in the settlement of securities, the CSDR provides primarily for the following:

• Uniform requirements for the settlement of financial instruments throughout Europe
• Rules on the organisation and business activities of CSDs
• Rules on the authorisation and supervision of CSDs as well as the cooperation between the national supervisory authorities within the EU
• Requirements for national sanctions provisions

The objective of the CSDR is to harmonise settlement periods and settlement discipline and to lay down certain prudential rules for CSDs which provide securities settlement services. This should lead to an improvement in the legal and operational conditions for cross-border settlement in the EEA and encourage competition between CSDs. It thus serves to promote the creation of an open internal market for securities settlement.

The above-mentioned Regulation does not have to be transposed into national law because it will apply directly in Liechtenstein when the relevant decisions of the EEA Joint Committee to incorporate it into the EEA Agreement take effect. Under national law, all that has to be enacted are supplementary provisions concerning the competent authority and its powers, as well as provisions for penalties and provisions requiring compliance with the CSDR. For these purposes, Liechtenstein has enacted the EEA Central Securities Depositories Implementation Act (EWR-Zentralverwahrer-Durchführungsgesetz, EWR-ZVDG). The consultation period ends on 17 February 2017. The entry into force of the EEA Central Securities Depositories Implementation Act will take effect simultaneously with the entry into force of the decision of the EEA Joint Committee on the adoption of Regulation (EU) No. 909/2014.

The Regulation (EU) No. 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories (CSD Regulation, CSDR) shall be incorporated into the EEA agreement by January 1st 2020. You can check the current status of the adoption procedure by clicking on the following link.