NatWest Corporates and Institutions

Central Securities Depository Regulation (CSDR)

What is the Central Securities Depository Regulation (CSDR)?

CSDR is a European regulation that aims to establish a level playing field among European central securities depositories (CSDs) and improve the operational efficiency of securities settlement, leveraging enhanced infrastructure and more robust, consistent discipline measures that will encourage timely settlement and reduce settlement fails.

What are the key objectives of CSDR?

  • Standardises the CSD regulation across the EU/EEA;
  • Provides greater transparency and more open access in the market;
  • Shorter settlement periods; and
  • Improved settlement discipline and reduces the number of fails through the Settlement Discipline Regime (late matching and settlement fines, mandatory cash penalties and buy-ins for settlement fails).

What is the timeline for implementation?

The CSDR Settlement Discipline Regime, with the exception of the mandatory buy-in provisions, will apply from 1st Feb 2022. The mandatory buy-in provisions of CSDR have been delayed following recent regulatory statements.

What are the Products in scope?

The Settlement Discipline Regime applies to all transactions settling over an EU/EEA CSD in transferable securities which includes shares/bonds Money Market Instruments, Units in Collective Investment Undertakings and emission allowances which are either admitted to trading or traded over a trading venue or which are cleared by a European CCP and to all participants in the settlement chain regardless of their location.  Transactions for these purposes include cash bond purchase and sales, collateral management operations, securities lending and repo.

What are the key features of CSDR?

The key provisions currently due to come into force on 1st February 2022 that impact business processes relate to:

  • Penalties for settlement fails/late matching - CSDs and CCPs will implement a penalty mechanism for settlement fails or late matching of transactions which will serve as a deterrent for participants that cause settlement fails. Calculation of cash penalties will be performed daily. The calculation will be done for each business day a transaction fails to settle after its intended settlement date, up to the moment of the actual settlement date.  Penalties will apply to in-scope settlements of transactions between NWM Entities; NatWest Markets Plc, NatWest Markets N.V., NatWest Markets Securities, Inc., NatWest Markets Securities Japan and their respective counterparties. Penalties are further divided into 2 types as below.
    • Late Matching Fail Penalty (LMFP) – to be applied on any instruction which is matched after the relevant cut-off of its intended settlement date.
    • Settlement Fail Penalty (SEFP) – to be applied on any matched instruction, which fails to settle (including when being on hold) on its intended settlement date.
  • Penalty rates

    Type of Security Penalty
    Liquid Shares 1 basis point (bp)
    Illiquid Shares* 0.5 bp
    SME Growth Market 0.25 bp
    Corporate Bonds 0.2 bp
    SME Growth Market Bonds 0.15 bp
    Government and Municipal Bonds 0.1 bp
    Cash++ European Central Bank Discount Rate

  • Allocation and Confirmation (A&C) - The allocation and confirmation requirements require the exchange of certain prescribed information between counterparties and EU investment firms in relation to settlement to reduce the chance of settlement fails through mis-matches in settlement instructions at the CSD level.

Who is impacted?

  • Penalties: The penalty feature of CSDR applies to all EU CSDs and to all market operators in the context of securities settlement, trading parties, central counterparties (CCPs), and clearing & settlement agents. Penalties levied by CSDs will be non-profit making and all credits and debits will be accrued, on a trade by trade basis, to the CSD participants, they can then be passed back through the custody chain to the ultimate trading party.  The CSD will apply a net debit or credit to each participant on a monthly basis.  NWM intends to follow the AFME guidelines for bilateral claims in respect of penalties should these be incurred in trading with clients (see AFME bilateral claim (PDF)).
  • Allocation and Confirmation: The Allocation & Confirmation requirements apply only to EU investment firms like NatWest Markets N.V. when dealing with professional (which is deemed to include eligible counterparties) or retail clients in relation to any transaction described above, where securities are ultimately settled over a European CSD.  We will be sending an Allocation & Confirmation agreement to clients of NatWest Markets N.V. to incorporate the A&C requirements into our contractual arrangements with them. The Allocation & Confirmation agreement is substantially based upon an agreement developed by AFME, a leading trade association of which we are a member.  The AFME agreement together with an explanatory note can also be downloaded at AFME: CSDR Model Contractual Provisions

What should NWM clients be doing to prepare?

Clients who trade with NWM should be reviewing the impact of CSDR and communicating with their CSDs or settlement agents to:

  • Review internal processes for monitoring and preventing fails
  • Adjust internal processes and systems to account for penalties
  • Where applicable, enabling systems for reporting fails to competent authorities
  • Ensure technical changes made by CSDs or settlement agents are understood and implemented internally

How is NWM preparing for settlement infrastructure changes as a result of CSDR?

  • NWM maintains ongoing dialogue and engagement with CSDs, custodians and their networks, as well as industry associations, to ensure alignment in settlement prevention best practices and overall CSDR readiness.
  • NWM is liaising with CCPs to understand how they intend to apply Penalties reporting and how CSDR features like Penalties, Bilateral claims and other associated claims will be handled at their end.
  • Operational requirements to enhance the settlement matching process across NatWest Markets Entities are as follows:
    • If we currently utilize an electronic matching process for settlement instructions, this process will remain and continue to be used.
    • If electronic matching is not in place, then each time a client enters into a transaction to which the A&C requirements apply with any of our NatWest Markets entities, NWM settlements/Operations team will contact the client to obtain the written allocation information and confirmation of the trade from them including Standard Settlement Instructions (SSI) in order to avoid any mismatch.
    • We shall confirm receipt of this information from clients using existing messaging channels in place with them.
    • If a client would like to move from a manual to an electronic matching platform, they must send a prior notification with the associated account details to email: FI Confirmations in order to get this implemented.

If you have any further queries regarding CSDR, please email:


Useful links

Please refer to this link for contractual agreement updates shared with NWM clients as part of the CSDR Client Outreach exercise which cover the A&C requirements.


For more information about CSDR:


External Links:


Supporting regulatory documentation: