STSM125040 - Financial markets central counterparties: Central Securities Depositories
Central securities depositaries (CSDs) ensure the transfer of securities and payments after trading and provide legal certainty to market participants by keeping accurate records of ownership of securities.
A CSD is a financial market infrastructure (FMI) institution which provides settlement services, as well as at least one other “core service” (notary or central maintenance services) defined under CSDR. CSDR defines settlement as “completion of a securities transaction where it is concluded with the aim of discharging the obligations of the parties to that transaction through the transfer of cash or securities, or both”.
The financial instruments that a CSD can settle are listed under part 1 of schedule 2 of the Financial Services and Markets Act 2000 (Regulated Activities) Order (SI 2001/544). Ownership of those financial instruments can be transferred in electronic form through updating electronic records which are often known as “book-entry records”.
A CSD is either authorised or recognised by the Bank of England (BoE) under article 16 (UK CSD) or 25 (Non-UK CSD) of CSDR. As part of a CSD being authorised or recognised by the BoE, the CSD will agree to provide core services of settlement and at least one other core service.
The only current UK CSD is Euroclear UK and International (EUI), which operates the CREST system. More information on CREST is available in guidance starting at STSM130000. The BoE is the competent authority for the authorisation, supervision and policy for CSDs in the UK. More information on the UK’s domestic statutory framework for CSDs can be found on the BoE website.
Other definitions
“CSDR” means Regulation (EU) 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 as it forms part of assimilated law, and any refence to requirements contained in or to functions under the regulation includes a reference (as the case may be) to requirements contained in or to functions under:
- any EU regulation, originally made under the regulation, which is assimilated direct legislation; or
- any subordinate legislation (within the meaning of the Interpretation Act 1978) made under the regulation on or after IP completion day (31 December 2020 at 11pm).