Central securities depositories regulation: The next systemic crisis waiting to happen?

Koen Vanderheyden, Partner, DLA Piper and Tim Reucroft, Director of Research, Thomas Murray Advisory Services

Abstract: Central securities depositories (CSDs) are essential infrastructures within the securities market. Historically, they were natural monop­olies serving many functions and providing many services, but now they are being regulated and their role closely defined, with some activities curtailed and then subjected to competition with the objective of forcing rationalisation and consolidation of the European post-trade landscape. The Central Securities Depositories Regulation EU (No. 909/2014) of the European Parliament and of the Council dated 23rd July, 2014 (CSDR) seeks to increase the safety and efficiency of securities settlement and settlement infrastructures. This paper will explore the likely impact of CSDR on the European landscape. The author’s view is that, instead of increasing safety and efficiency as CSDR is supposed to, the consequences will increase the systemic risk within the European capital markets. The question is whether CSDR will be able to solve more problems than it causes, and whether or not CSDR in fact may be the next systemic crisis waiting to happen.


Keywords: CSDR, systemic risk, issuer CSD, settlement internalisers, settlement fails.


Koen Vanderheyden is a partner at DLA Piper Belgium and Luxembourg, where he is a partner and head of the financial services regulatory practice. He focuses on advice to financial institutions and investment funds on financial market law and regulation, post trading capital markets infrastructure, settlement finality, financial collateral, clearing and settlement, payment services, derivatives and securities regulation and custody liability. He has assisted countries modernise their capital markets infrastructure benefiting from the experiences of consolidation, harmonisation and best market practices in the EU. He led cross-border studies and advised on the trading and post trading capital markets infrastructures for the European Commission and in Romania, Russia, Iraq and Qatar. In addition he advises on fund structuring, EMIR implementations and on a broad range of derivatives and structured synthetic products, and is the author of country opinions for ISDA, ICMA and ISLA. Previously he worked for PwC and PwC related law firms.


Tim Reucroft developed Thomas Murray’s (TM’s) central securities depository (CSD) risk assessment programme covering 130 CSDs globally. He then developed TM’s central counterparty (CCP) risk assessments covering 30 of the top CCPs. Now he leads TM’s Advisory Services, helping to modernise capital markets infrastructures in Russia, Ukraine, South Africa, Qatar, Dubai and Saudi Arabia. Much of his current work is driven by the mandatory requirements of EMIR and Dodd Frank for both institutional investors subject to mandatory clearing and third-country CCPs seeking ESMA recognition. Previously, he was a consultant with Capco and KPMG, Head of Derivative Operations at Salomon Brothers London and Head of Compliance at LIFFE. He holds degrees in natural sciences (Cambridge) and philosophy (London) and is a (lapsed) qualified accountant.




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