CSD

Partial settlement is an important feature of the settlement process to mitigate liquidity risk. It allows the settlement of part of a trade in case of a shortage of securities on the intended settlement date and, therefore, reduces the value at risk of failure. This process can be complementary to the shaping which splits settlement instructions into lower quantities.

Nowadays, it is not the norm for several entities to provide settlement and depository services to similar asset classes in the same market. Only a few countries have maintained the multiple central securities depositories (CSD) model. The past decade has seen several competing CSDs being consolidated into a single entity. Changes to regulations have also helped re-shape the settlement and depository landscape.

We explore regulation in the CSD space from the perspective of BNY Mellon, a new CSD in Europe

One of the more interesting developments in the CSD space in recent years has been the evolution of competition. In line with the response to the post-2007 financial crises, CSDs have not been exempt from the wave of new regulation that has swept through financial markets and financial market infrastructures. Whilst this has posed challenges, it has also created opportunities. The CSD space is undergoing a transformation in Europe with the switch to T+2 settlement, the advent of T2S and the introduction of new players to the market.

The T+2 settlement cycle will be intmroduced across Europe during 2014. We look at the ins and the outs; the pros and the cons.

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