EC: Proposal for a Regulation of the European Parliament and of the Council on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC

The EC has proposed the setting up of a European common regulatory framework for the institutions responsible for securities settlement, called Central Securities Depositories. The proposal contains the following key elements: - The settlement period will be harmonised and set at a maximum of two days after the trading day for the securities traded on stock exchanges or other regulated markets (currently two to three days are necessary for most securities transactions in Europe). Market participants that fail to deliver their securities on the agreed settlement date will be subject to penalties, and will have to buy those securities in the market and deliver them to their counterparties. - Issuers and investors will be required to keep an electronic record for virtually all securities, and to record them in CSDs if they are traded on stock exchanges or other regulated markets. - CSDs will have to comply with strict organisational, conduct of business and prudential requirements to ensure their viability and the protection of their users. They will also have to be authorised and supervised by their national competent authorities. - Authorised CSDs will be granted a 'passport' to provide their services in other Member States. - Users will be able to choose between all 30 CSDs in Europe. - CSDs in the EU will have access to any other CSDs or other market infrastructures such as trading venues or Central Counterparties (CCPs), whichever country they are based in. The proposal now passes to the European Parliament and the Council (Member States) for negotiation and adoption.