On 10 June, the European Central Securities Depositories Association (ECSDA) welcomed the opportunity to respond to the European Commission Targeted Consultation on integration of EU Capital Markets.
CSDs are regulated market infrastructures enabling issuance, settlement and servicing of securities in the EU capital markets, interconnecting companies and investors across the EU.
European CSDs play a key role in helping issuers and investors navigate Europe’s complex multijurisdictional landscape. They process corporate actions on behalf of issuers and for the benefit of entitled investors, ensuring compliance with the corporate laws of the 27 European jurisdictions and beyond.
By providing secure and increasingly harmonised services, CSDs protect financial stability, reducing counterparty failure risk, keeping safe and certain investors’ rights over assets, and promoting transparency. Through ongoing innovation and harmonisation efforts, they support market efficiency and help strengthen investor confidence across the EU.
European CSDs remain strongly committed to supporting the SIU objectives by delivering secure, efficient, and innovative post-trade services.
As a general introduction, we recall the recent response to the Call for evidence on SIU. With this consultation ECSDA members would like to share the following key messages on SIU:
1. Cross-border provision of CSD services, links and freedom of issuance: clarity on drivers and room for further simplification
CSDs support the strengthening of the CSDR principle of freedom of issuance with convergent interpretation of the concept of “corporate law” in the field of post trade
We propose to underpin the idea of more interconnection between CSDs to support SIU with a deep understanding of the drivers of the market architecture being liquidity and demand sustainable business case, differences in the legal and tax requirements creating costs and complexities non only in the set up but also in the maintenance. CSDs also identify areas of simplification in the links authorization process.
We advocate for more collaboration across the value chain to make T2S, as essential and strong European infrastructure more efficient and scalable.
2. Post-trade barriers
With the consultation response, CSDs promote a clear identification of the remaining barriers and their effects on the market architecture.
On legal barriers, there are no inherent legal certainty issues affecting CSDs. It is essential to clarify that that as far as CSDs are concerned, the need to comply with diverse legal and tax frameworks across Member States, which hinders the harmonised handling of securities and limits scalability; the existence of passporting to handle foreign issuance is the symptom and prove of unresolved legal fragmentation; however, in our view, this fragmentation does not significantly deter cross-border investment decisions.
3. Regulatory simplification preserving competition and level playing field
ECSDA supports the values and merits of the EU regulatory framework, including technological neutrality, a level playing field, and functional consistency.
We also support regulatory simplification and burden reduction driven by greater convergence in the interpretation and implementation of EU legislation.
We recommend addressing overlaps and contradictions for example in the areas of operational resilience and cybersecurity—such as those found in CRA, NIS, DORA, CSDR, CRD/CRR, and MiFID—as well as in outsourcing frameworks across multiple legislations.
4. DLT operational and regulatory evolution
CSDs support the development of DLT in post trade services based on solutions that do not create further liquidity fragmentation. In the DLT field the regulatory framework is well structured and risk resilient and can be supported with clarifications and regulatory convergence to foster innovation and technology adoption.
Fragmentation in digital securities laws is emerging and can be avoided or solved with the idea of 28th regime for digital securities.
We emphasise the need for clarity on feasible DLT architectures to ensure that activities related to the registration and holding of securities are supported by a framework with clearly defined responsibilities.
For further modernisation and integration of different capital market segments, we also support the acceptance of wCBDC as CeBM, and a large range of DLT-based securities under the CSDR.
On the DLT Pilot Regime, ECSDA encourages greater legal and regulatory certainty regarding the transition pathway. In particular, it advocates for clear incentives that support firms in moving from the DLTPR to a fully regulated environment, including the integration of all services tested during the pilot phase into the permanent regulatory framework
Read the full response
