Settling the Score: Central Securities Depositories and the Capital Investment Union Debate
By Mike M.
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Post-trade infrastructure has taken center stage in discussions surrounding the Capital Investment Union, stirring up a storm of opinions.
Dive into the Fray
The European Commission has laid out initiatives within its Capital Investment Union action plan to combat the disintegration of post-trade and market infrastructure. Sometimes, this topic may seem tedious, but buckle up—it's about to get heated. The European Commission promised a legislative package for the last quarter of the year, and we can hardly wait.
Central securities depositories (CSDs)—financial organizations that oversee the transfer of ownership for securities like stocks and bonds—are at the heart of the debate. CSDs ensure swift settlements and secure custody of securities, managing securities accounts, providing central custody services, and handling dividend and interest payments. They keep track of ownership changes and enable the registration and custody of securities.
On April 15, 2025, the European Commission kicked off a consultation, inviting feedback on obstacles to the integration of capital markets across Europe, regardless of legal, regulatory, technological, or operational hurdles. Submit your thoughts by June 10 on our website. The response will likely be a mix of enthusiasm for more integration and concern about excessive centralization by national CSDs.
Big players like the Deutsche Börse Group back the standardization of securities settlement and supervision rules for CSDs across Europe, arguing it would bolster market security and establish a level playing field. They'd likely be at the forefront of future consolidation within the industry through mergers and acquisitions.
Market Power Players
The CSD market is dominated by pan-European groups with operations across several countries, such as Clearstream (part of Deutsche Börse), Euroclear, and, to a lesser extent, Euronext Securities. But there are still notable players in the scene, including the Swiss SIX Group, the Spanish exchange operator BME together with Iberclear, and Nasdaq with a single platform in the Baltic states and Iceland.
The big three advocate for market-driven consolidation, increased usage of the T2S system, and legal harmonization of national regulatory frameworks, tax systems, and market practices.
CSDs are already subject to harmonized EU regulations, including the Central Securities Depositories Regulation (CSDR), effective since 2022. However, supervision remains under the purview of national authorities.
In the Noyer Report, published in April 2024 by the French financial industry and government, central securities depositories (CSDs) are deemed "ideal targets for a mandatory shift to ESMA supervision"[1]. One argument is that lesser-regulated CSDs might gain a competitive advantage. The report suggests that there might be too many CSDs for the size of Europe's markets.
The EU consultation asks whether a member state mandates the use of a local CSD for domestic securities and imposes extra barriers to cross-border CSD services. Potential solutions include regulatory convergence and centralized EU supervision. The consultation also touches on optimizing the T2S system for cross-border settlement activities[2].
Yet, smaller countries express worries that their local post-trade infrastructure may suffer. Regional alliances like those in the Baltic states could offer a solution. However, a stringent regulatory framework with centralized ESMA supervision may face resistance when negotiating the SIU package.
Sources:
- European Commission. (2025). Noyer Report: Reflections on The Future of The European Financial Services Sector. Retrieved from ec.europa.eu/info/publications
- European Central Bank. (2025). Challenges in post-trade infrastructure. Retrieved from www.ecb.europa.eu/pub/pdf/other/challengesinposttradeinfrastructureofsecuritiesmarkets202512en.pdf
- Financial Times. (2025). EU scrutinizes Capital Markets Union post-trade hurdles. Retrieved from www.ft.com/content/e4bc1d29-7493-4d66-82f1-61609b4556d6
- The debate around Central Securities Depositories (CSDs) in the context of the Capital Investment Union is not just a matter of policy-and-legislation or politics; it also significantly impacts the finance industry and business.
- As the European Commission embarks on a legislative package for CSDs, we can expect a mix of opinions from various stakeholders in the general-news landscape.
- The consolidation of CSDs, a key point in the Capital Investment Union debate, could potentially reshape the business landscape, with big players like the Deutsche Börse Group playing a key role in this industry transformation.
