A dense network of CSD links

26 Jan 2015 – A “CSD link” is an arrangement allowing a central securities depository to give its clients access to securities maintained in another CSD, without requiring its clients to be direct participants in the other CSD. Links are thus an important means to facilitate cross-border securities transactions and they contribute to market integration. Based on data collected in the second half of 2014, ECSDA has produced an overview of CSD links which shows that a dense network of links has developed over the past years.

• Only 4 out of the 41 CSDs covered by the ECSDA links mapping exercise have no links at all with other CSDs. 3 other CSDs only maintain “inbound links” allowing foreign CSDs to access their local market. The remaining 34 CSDs have both inbound and outbound links.
• If we set aside the three CSDs which maintain an unusually high number of links (Euroclear Bank, Clearstream Banking Luxembourg and SIX SIS), the average European CSD had just under 7 links as investor CSD as of end 2014. The number is even higher for CSDs established in the EU (8.4 links on average per CSD).
• The majority of CSD links (over 40%) are direct links whereby the CSD is a direct participant in another CSD. Indirect links (via a sub-custodian) and relayed links (via a middle CSD) each account for just under 30% of the total number of links.
• More than 2/3 of CSD links allow for settlement on a delivery versus payment basis, meaning that not only securities but also cash transfers are possible through the link. The vast majority of links allow for the transfer of both equities and debt instruments.
• More than half of all CSD links are actively used by market participants, i.e. they are used on a daily basis. Around 40% of the remaining links are used on a weekly or monthly basis, and just over 5% have never been used.
• As at end 2014, there was no striking difference between the number of links maintained by CSDs participating in the TARGET2-Securities project of the Eurosystem and the number of links maintained by non-participating CSDs established in the EU. It will be interesting to see whether the number of CSD links increases substantially among participating CSDs after T2S is fully implemented in 2017.
• As regards the operating hours of links, the typical delay observed in the processing of securities transfers via a CSD link is less than 3 hours compared with the same transfer being processed directly at the issuer CSD, outside of any link arrangement. Direct CSD links typically display shorter delays, with the vast majority of the longer delays resulting from indirect or relayed links.

Overview of CSD links in Europe

Full mapping of CSD links (Excel file)