Central Securities Depositaries Regulation (CSDR)

CSDR (Central Securities Depository Regulation) is a European Union regulation (EU) No. 909/2014 developed by the European Securities and Markets Authority (ESMA), also adopted by SIX SIS. The main objectives are to increase the safety and efficiency of settlements, in particular cross-border transactions and increase the safety of Central Securities Depositories (CSDs) by applying high prudential requirements.

On this page



CSDR stands for Central Securities Depository Regulation.

It is a European Union Regulation (EU) No 909/2014 1 developed by the European Securities and Markets Authority (ESMA), designed to increase the efficiency of settlements and ensure settlement failures are resolved promptly, on EEA Central Securities Depositaries (CSDs).

The key provisions currently expected to come into force on 1st February 2021 that impact UBS and Client business processes relate to:

  • Penalties for failing/late settlements
  • Mandatory Buy-In Regime
  • Allocation and Confirmation process

CSDR is quite wide ranging in its impact with a number of provisions already in force:

  • Segregation of assets at CSDs (Article 38): where we hold securities directly for clients with CSDs, pursuant to CSDR we are now required to offer different levels of segregation. This can be found in Useful links under Investment Bank CSDR Disclosures.
  • Internalised Settlement Reporting (Article 9): in-scope custodians must report all non-CSD settled transactions ("Internalised Settlement") to their National Competent Authority (and on settlement efficiency).

Penalties and buy-ins

Any trade of securities that are admitted to trading or traded on an EEA trading venue or cleared by an EEA CCP (such as purchases or sales of securities and transactions subject to securities repurchase or lending agreements) that fails to settle on an EEA CSD will be subject to a penalty charged by the EEA CSD:

  • If the trade is unmatched the trade will be subject to a "late matching penalty" levied on the last participant to submit matching instructions for each day until matched.
  • If the trade fails to settle, due to missing security or cash payment, the trade will be subject to a "late settlement penalty" that will be levied on the party at fault for each day until the trade is settled, cancelled or the mandatory buy-in takes effect.

Penalties vary by asset type. The table below provides an overview of the rates (which are applied against an applicable reference price).

Type of Security

Type of Security



Type of Security

Liquid Shares


1 basis point (bp)

Type of Security

Illiquid Shares*


0.5 bp

Type of Security

SME Growth Market


0.25 bp

Type of Security

Corporate Bonds


0.2 bp

Type of Security

SME Growth Market Bonds



Type of Security

Government and Municipal Bonds


0.1 bp

Type of Security



European Central Bank Discount Rate

Clients are advised to consult the ECSDA CSDR Penalties Framework  for a detailed breakdown of the scope and penalties calculation methods along with full details of instruments in scope of CSDR.

Any trade of securities that are admitted to trading or traded on an EEA trading venue or cleared by an EEA CCP (such as purchases or sales of securities and transactions subject to securities repurchase or lending agreements) that fails to settle on an EEA CSD could be subject to the mandatory buy-in regime. Below is a brief summary of the mandatory buy-in provisions under CSDR:

  • CSDR Article 7 provides that the buy-in process will be initiated if the failing party does not deliver to the receiving party by the end of the extension period.
  • It is the duty of the receiving party to initiate the buy-in against the failing party through an appointed Buy-in Agent.
  • Mandatory buy-in rules are focused on the failure to deliver securities rather than cash.
  • The extension periods for initiation of a buy-in are dependent on the type of security, as shown below:

Type of Security

Type of Security

Buy-In Period

Buy-In Period

Type of Security

Liquid Shares

Buy-In Period

4 days*

Type of Security

Other Securities

Buy-In Period

7 days*

Type of Security

SME Growth Market Securities

Buy-In Period

15 days*

  • At the end of the extension period, if any of the securities are available for settlement, partial settlement must occur.
  • Partial settlement will reduce penalties for the party failing to settle.
  • If none, or only some, of the securities have been delivered at the end of this period then the purchaser will, where possible, appoint a Buy-In Agent and initiate the buy-in creating a replacement transaction for the original trade.
  • Compensation for each buy-in will be claimed from the failing party. If a buy-in is not possible or is unsuccessful, cash compensation is paid.
  • Exclusions to the mandatory buy-in regime include Securities Financing Transactions of less than 30 days, primary issuance, most corporate actions and realignments. There are ongoing industry discussions to confirm additional exclusions e.g. collateral movements and physically settled derivatives.

This document (PDF, 536 KB) produced by AFME shows an example of the penalties and buy-in process.

CSDR requires partial settlement under the mandatory buy-in regime on the final day of the extension period. Clients will need to enable this functionality at their accounts at the CSD. It is expected to simplify the settlement process and improve liquidity. Best practice as recommended by AFME is to have this option permanently turned on.

The current market practice for buy-ins generally allows for the payment of the differential between the buy-in price and the original trade price to be made in either direction between the selling and the purchasing parties, depending on whether the buy-in price is higher or lower than the original trade price. This ensures an equitable remedy to the buy-in, with neither party receiving or incurring an undue benefit or cost. It places the parties in the position they would have been if settlement had occurred on the ISD.

The CSDR mandatory buy-in and cash compensation processes only allow for the payment of the differential to be made from the seller (the failing party) to the purchaser (the receiving party), in the event that the buy-in or cash compensation reference price is higher than the original trade price. This creates potential issues as there is asymmetry of the payment of the differential, which creates an unequitable remedy that will unduly benefit the purchaser and penalize the seller in the event that the buy-in or cash compensation reference price is lower than the original trade price. Industry bodies are lobbying ESMA for two way payments to be permitted. Detailed discussion of this issue can be found in the ICMA paper 'How to survive in a Mandatory Buy-in World '.

The CSDR legislation does not envisage pass-ons (e.g. in the case of a buy-in chain). This is, however, recognised as best practice to avoid multiple buy-ins occurring on the same security at the same time. Industry representations have been made to ESMA to adopt this. In addition, a cross industry group including ICMA and AFME have drafted an approach to managing these scenarios at an industry level. There is, however, a lack of clarity on how this would work and who would perform the necessary chain identification / pass-on communication process.

The CSDR legislation envisages the appointment of a Buy-In Agent. How this process will work and guidelines (especially for conflict of interest) are currently being raised in industry representations with ESMA.

UBS is awaiting this guidance to understand what the exact requirements will be of a Buy-in Agent.

We are aware of a number of providers that are or are planning to offer a Buy-In Agent service but cannot comment on the viability of such offerings.

To reduce penalties and buy-in exposure, clients should review their operational processes and discuss settlement efficiency with their executing brokers to understand any issues that prevent straight through processing (STP) of settlement obligations. Key areas to address include:

  • Adoption of electronic trade affirmation methods
  • Optimisation of matching and pre-matching processes to quickly identify and resolve discrepancies in trade bookings between counterparties
  • Accuracy and completeness of Standard Settlement Instructions (SSIs) provided to brokers
  • Place of Settlement (PSET) preferences are understood and provided to brokers
  • Ensuring securities are correctly located for timely settlement

Allocation and confirmation

CSDR allocation and confirmation process provisions apply to all securities transactions that settle on an EEA CSD or ICSD due to their activities in EEA markets.

There are exemptions for entities which are not in EEA markets, for example US or Swiss incorporated entities and also where the relevant details are already held by UBS and pre-agreed with the client. UBS's current interpretation is that this will apply to custody clients only.

CSDR prescribes (i) the trade matching fields and timings required for written trade allocations and (ii) the timings required for written confirmation of the acceptance of a transaction.

Clients must send written allocations and confirmations to UBS containing the required eleven fields on Trade Date or 12.00CET the following day if the order was executed after 1600CET or there is a time-zone difference of more than 2 hours between UBS and the client. UBS shall confirm receipt of the written allocation and of the written confirmation within two hours of that receipt.

UBS will offer to all of its clients the ability to send allocations and confirmation acceptances via electronic (e.g. DTCC) or manual methods (e.g. email, fax, paper). UBS would encourage clients to use electronic means where possible to ensure required fields and timings can more easily be achieved.


UBS response to CSDR

UBS recognised the impact of CSDR on its securities settlement operations early and initiated a group-wide program in 2017 to focus on improving settlement efficiency and implementing the requirements of CSDR.

Key areas UBS is investing in are:

  • "Ready to Trade" – ensuring customer details are available up front, set up in our systems and accurate (especially SSIs) to enable matching to occur
  • Matching – while UBS already has a good matching rate, our aim is to improve this through data clean up, use of electronic matching capabilities for increased STP and improved and more timely error handling
  • Inventory Management – improved visibility of our securities inventory, improving our real-time capabilities to cope with incoming fails and increasing automation, particularly for cross-border transactions
  • IT Investments underpinning the above to support visibility of our processes, automate tasks and support real time decision making e.g. fails handling, partial settlement opportunities and netting opportunities

Areas where we are and will be engaging with our clients include:

  • Ensuring data (including PSET preferences and SSIs) we hold on or clients is accurate to enable matching to occur
  • Ensuring clients, where possible, communicate allocations and confirmations with UBS via an electronic standard offering and provide the relevant fields within the required time
  • Requirements for partial settlement
  • Identifying netting opportunities with counterparties

In due course we will engage with clients regarding changes to relevant legal agreements to implement CSDR. Documentation requirements are currently being discussed within industry working groups.

Broadly, UBS prefers to settle domestically for equities and at Clearstream for fixed income. However, to ensure STP we require clients' PSET preferences and that any changes to these PSET preferences are communicated to UBS in advance and are rule-based where possible.


CSDR scope – additional considerations

Certain Security Financing Transactions (SFTs) under 30 days are out of scope for the buy-in regime but technically all other repos and stock lending transactions are in-scope. ICMA are lobbying ESMA for open SFTs to be out of scope as well.

Whilst OTC and exchange traded derivatives are not themselves included in the list of in-scope financial instruments for the purposes of the settlement discipline regime of CSDR, such derivatives are potentially impacted in the following ways:

  1. Physically settled OTC and exchange traded derivatives - the delivery of in-scope financial instruments to settle physically-settled such derivatives. OTC and exchange traded derivatives that are physically settled by the delivery of cash in one or more currencies are therefore not in scope
  2. Margin transfers – the transfer of margin where the relevant margin consists of in-scope financial instruments.

ESMA continues to be subject to advocacy by relevant industry bodies to seek clarification that margin transfers should not be subject to mandatory buy-ins.


Legal documentation

Contractual documents will need to be amended as part of CSDR to include allocation and confirmation requirements and mandatory buy-in requirements. UBS is part of ongoing industry discussions to determine a market-wide solution where possible, including use of protocols and standard annexes. UBS will communicate any changes to clients once an approach has been defined.


CSDR and Brexit

As CSDR will come into force after the end of the Brexit transition period, it is unclear whether the UK government will introduce domestic settlement discipline requirements in due course, or how such rules may apply to the CREST UK CSD. Current UBS assumption is that CREST UK CSD will implement CSDR in full.

Investment Bank CSDR Disclosures – Information regarding the levels of protection associated with different levels of segregation in respect of securities held directly for clients with CSD (segregation) for Investment Bank Clients:

Contact us

For further information, please reach out to your usual UBS contact or send us an email to: